Letter of Transmittal

09th February, 2021

Md Mahbub Alam
Associate Professor & Supervisor
Department of Management Studies
Comilla University, Cumilla-3506.

Subject: Submission of an Internship Report.

Sir,
I am pleased to submit this Internship report as you entitled me. I tried my best to present this
internship report on “Loan and Advance – A Study on Sonali bank” according to your
guideline. I tried my best to work sincerely to cover all aspects regarding the matter. Though
I faced some limitations in preparing this report, I have thoroughly enjoyed in preparing this
internship report which has contributed significantly to my understanding on the essentials
and importance practical knowledge.

I sincerely hope that you will appreciate my effort.

Sincerely yours,

…………………………….
Afshara Taslima Mazumder

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Certificate of Organization

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 Declaration

I, Afshara Taslima Mazumder, a student of Department of Management Studies at Comilla

University, Cumilla, hereby declare that the internship report on “Loan and Advance: A
Study on Sonali Bank Limited” is an original work done by me for partial fulfillment of the
requirements for Bachelor of Business Administration (BBA) degree, as a part of my
academic curriculum.

It or any part of it has not been copied from any other report. It has not been submitted to any
other university or institute for any degree or diploma.

---------------------------------
Afshara Taslima Mazumder

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 Declaration of Supervisor

This is to certify that the report entitled “Loan and Advance: A Study on Sonali Bank
Limited.” presented here has been prepared by Afshara Taslima Mazumder bearing the
Registration No: 11605003 and ID No: 11605003 for the submission to the Department of
Management Studies, Comilla University, Cumilla in the partial fulfillment of the
requirements for the degree of Bachelor of Business Administration (BBA). This report is
suitable for submission.

I wish her every success in life.

…………………………………….
Md Mahbub Alam

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 Acknowledgement

No work can be completed by one individual without the help of others. In every step of
this study many individuals and institutional experts supported me. It gives me an immense
pleasure to acknowledge them with my gratitude. First of all I would like to convey my
deepest gratitude to Almighty CREATOR who gave the power, strength and energy to
perform the functions of report preparing. My heartiest gratitude also goes to my parents who
helped me at every steps of my life. I wish to know my heartiest respect to the following
persons for their immense support and cooperation towards the compilation of this report. I
also wish to mention that without their help, this report could not be accomplished and I
would like to extend my heartfelt gratitude to them for their assistance and empathy.
 Md Mahbub Alam, Associate Professor & supervisor Department of Management
Studies, Comilla University, Cumilla.
 Amir Sohel Mohammed Ali Ahsan, SPO & Branch Manager, Kotbari Branch, Sonali
Bank Limited, Cumilla.
Last of all I would like to convey my cordial thanks to all those Authors, websites, journals
and publications from which I have taken the necessary information in preparing this report.

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 Executive Summary

Bachelor of Business Administration (BBA) is a comprehensive professional course

designed to make professionals with better business and administrative knowledge. After
studying and completing the relevant courses successfully, there is a provision to go through
internship in an organization. An important phase of BBA program is Internship, where
student experiences the real scenario, gets the opportunity to learn about the real professional
world and compare the events with whatever they have learnt so far. 

As a part of this activity, Comilla University had been successfully placing the
students to different professionally renowned organizations to give the respective students the
orientation of the real life corporate environment. Assigned by the institutional supervisor,
this report is prepared for internship and placement committee, based on the concepts learnt
in Sonali Bank Limited related to Loan and Advance. I was placed at Kotbari Branch of
Sonali Bank Limited in Comilla.

I present this report on the basis of the knowledge and experience gained during the
internship period of three months. The objective of my report was to study the procedure of
giving Loan and Advance, Monitoring, Collection of installment and prepare different
reports.

The first chapter gives a broad overview about the Origin of the report, Objective of
the report, Methodology of preparing the report, Data collection procedure and its source and
Scope of the report.

After the first part, it has been focused in the second part of the report Research
Methodology.

In chapter three, Literature Review is focused. The chapter four focused on The
Overview of Sonali Bank Limited consists of Introduction, Management, Organization
structure of the Sonali Bank, Corporate Mission, Corporate Vision, Goals. 

The report part started from chapter five, where loan and advance of sonali bank,
kotbari branch is discussed broadly. Chapter six includes Data Analysis: Analysis of Branch
Data, Analysis of Data (All Branch) and Ratio analysis. Chapter seven includes Problem,
Recommendation and Conclusion.

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 Acronyms

SBL Sonali Bank Limited

BB Bangladesh Bank

B/E Bill Of Exchange

B/L Bill Of Lading

TIN Tax Identification Number

ROA Return on Asset

ROE Return on Equity

EBIT Earnings Before Interest Tax

EPS Earnings per Share

P-E Price Earnings

DD Demand Deposit

LC Letter of Credit

RM Relationship Manager

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 List of Table, Chart, Graphs
Particulars Page
Table
01 Total deposit & Advance
02 Financial Statement Of Kotbari Branch, Comilla
03 Number Of Clients Of This Branch
04 Nature of deposit/loans & advances
05 Inside Bangladesh
06 Outside Bangladesh
07 Head Wise Loans, Cash Credit and Overdrafts
08 Industry Wise Loans and Advances of SBL
09 Sector Wise Loans and Advances of SBL
10 Bank Circular in Percentage
11 Announced interest rate chart of SBL
Figure
01 Management of Sonali Bank Limited
02 Cash Credit Sanctioning process of SBL
03 Sector Wise Loans and Advances of SBL
04 classification of Loans in percentage
05 Convenient Branch location
06 Trust-worthy banker-customer relation
07 Faster solution of credit complains
08 Feel free to give opinion
09 Strong privacy in credit information
10 Overall good service quality
11 Easy and quick disposal of loan
12 Promt desk service
13 Clear tearms and conditions of loan
14 Cordial Reply to credit queries

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 Table of Content

Particulars Page
Letter of Transmittal
Certificate of Organization
Declaration
Declaration of Supervisor
Acknowledgement
Executive Summary
Acronyms
List of Table, Chart, Graphs
CHAPTER 01 INTRODUCTION
1.1 Introduction
1.2 Origin Of The Study
1.3 Background Of The Study
1.4 Objectives Of The Study
1.5 Scope Of The Study
1.6 Methodology Of The Study
1.7 Limitations Of The Study
CHAPTER 02 RESEARCH METHODOLOGY
2.1 Research Methodology
2.2 Population Of The Study
2.3 Sampling of the Study
2.4 Data Collection Method
2.5 Techniques of Data collection
2.6 Instruments Used in Analysis
CHAPTER 03 LITERATURE REVIEW
3.1 Literature review

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 3.2 History of loan and advance
3.3 Role of Loan And Advance In Economic
Development
CHAPTER 04 PROFILE OF THE SONALI BANK
LIMITED
4.1 Historical Background Of Sonali Bank Limited
4.2 Corporate Profile Of Sonali Bank Limited
4.3 Some Notable Features Of SBL
4.4 Organizational Structure Of Sonali Bank Limited
4.5 Mission, Vision And Slogan Of SBL
4.6 Objectives Of Sonali Bank Ltd
4.7 Management Of Sonali Bank Ltd
4.8 Functions Of Sonali Bank Ltd
4.9 Credit Ratings Of Sbl
4.10 Sonali Bank Kotbari Branch Overview
CHAPTER 05 LOAN AND ADVANCE OF SONALI BANK,
KOTBARI BRANCH
5.1 Loan
5.2 Advance
5.3 What is Loan and Advance Management?
5.4 What is Loan and Advance Management process?
5.5 Guidelines for Credit Risk Management by
Bangladesh Bank
5.6 Loan and Advance Management framework
5.7 Counterparty Limits
5.8 Settlement risk
5.9 Pre-settlement risk
5.10 Stop Loss Orders
5.11 Factors Considered For Sanctioning Credit
5.12 Loan Documentation

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 5.13 Credit Proposal and Sanction Process of SBL
5.14 Borrower’s Preparation of Loan Proposal
5.15 Necessary Instrument for Issuing Debt
5.16 Credit Administrations of SBL
5.17 Loan Documents Check List
5.18 Loan Recovery Of Sonali Bank Limited
CHAPTER 06 DATA ANALYSIS AND FINDINGS
6.1 Financial Analysis of Credit Performance of
Sonali Bank
6.2 Questionnaire Analysis
6.3 Findings
CHAPTER 07 PROBLEM, RECOMENATION AND
CONCLUSION
7.1 Problems
7.2 Recommendations
7.3 Conclusion
REFERENCES
Appendices

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CHAPTER ONE
INTRODUCTION

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1.0. Introduction
It is said that without theory, practice is blind and without practice theory is meaningless.
An internship is designed to bridge the gap between the theoretical knowledge and real
application. The goal of internship is to apply one’s theoretical knowledge in practical fields.
Generally, by the word ‘Bank’ we can easily understand that the financial institution deals with
money. But there are different types of banks such as; Central Banks, Commercial Banks,
Savings Banks, Investment Banks, Industrial Banks, Co-operative Banks etc. But when we use
the term Bank’ without any prefix, or qualification, it refers to the Commercial banks.
Commercial banks are the primary contributors to the economy of a country. Banking sector is
expanding its hand in different financial events every day. At the same time the banking system
is becoming faster, easier and the banking area is becoming wider. As the demand for better
service increases day by day, they are coming with different innovative ideas and products. All
over the world the dimension of Banking has been changing, rapidly due to deregulation,
Technological innovation and globalization. Banking in Bangladesh has to keep pace with the
global change. Now Banks must compete in the market place both with local institution as well
as foreign ones. To introduce skilled Banker, only theoretical in the field of Banking studies is
not sufficient. An academic course of the study has a great value when it has practical
application in real life situation. So, I need proper application of my knowledge to get some
benefit from my theoretical knowledge make it more tactful. When I engage myself in such
fields to make proper use of my theoretical knowledge in my practical life situation. Such an
application is made possible through internship. From my internship I have tried to gather all
the information about the Loan and Advance Management of Sonali Bank LTD, Kotbari
Branch, Cumilla, Bangladesh. Through the internship I have become familiar with the banking
activities. Loan and Advance Management practices of Sonali Bank LTD have been covered in
order to accomplish the principal objective and making some moderate suggestion to overcome
the problems

1.1 Origin Of The Study

This internship Study was assigned for the completion of my MBA Program, Comilla
University. In accordance with the specifications of the Program, I have completed the 3
months period of the internship at Sonali Bank Ltd, Kotbari Branch, Cumilla.

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The Study is prepared under the supervision of the Academic Advisor Md Mahbub Alam,
Supervisor, Amir Ali Mohammed Ahsan, SPO & Branch Manager of Sonali Bank Ltd,
Kotbari Branch, Comilla.

1.2 Background Of The Study

Master of Business Administration (MBA) program requires usually a three months

attachment with an organization followed by a Study assigned by the supervisor in the
organization and endorsed by the faculty advisor. As a mandatory requirement, opportunity
of doing the internship was derived from the organization Sonali Bank Limited. The
internship Study is prepared as a partial fulfilment of the requirement of MBA program. The
Study is prepared based Loan and advance Systems of Sonali Bank Ltd, Kotbari Branch,
Cumilla.

1.3 Objectives Of The Study

The following Study has two types of objectives which are described as follows:

Primary objectives

The overall objective of this study is to acquire the practical knowledge about how a
banking financial institution carries out its activities. The main objectives of this Study to
evaluate the Loan and Advance Management of Prime Bank Limited.

Specific objectives

Beside the primary objective, there are some other objectives which are equally
important. The prime objective of the study is to examine -

 The Loan and Advance Management of Sonali Bank Limited.

 To give a brief overview of Sonali banks Ltd. and the day to day function
and service offered by the bank.
 Evaluation of Loan and Advance Management tools for effective
measurement of customer satisfaction.
 To identify problems and challenges of Sonali Bank Ltd.
 To get an overview of the banking system of Sonali Bank Ltd.
 To have better orientation on “Loan and Advance Management” activities of
Sonali Bank Limited, especially on various Credits and loan services offered by
the bank.

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  Finally, identify the major problem of SBL and provide subsequent
recommendations.

1.4 Scope Of The Study

There is a certain boundary to cover this Study. To achieve the objective of the Study,
i.e. to get an overall idea about the Loan and Advance Management on Retail Banking of
Sunali Bank Limited, it is not possible to cover each and every activity performed in the
organization. Sonali Bank Ltd of retail banking has diversified products covering consumer
durables to education.
The study would focus on the following areas of Sonali Bank Limited.

• Loan and Advance Management process.

• The Credit operations.
• Preferred Organization structures and responsibilities of Loan and Advance
Management.
Each of the above areas would be critically analyzed in order to determine the
efficiency of SBL’s Credit appraisal and Management system.

1.5 Methodology Of The Study

Methodology is generally a guideline system for solving a problem with specific

component such as phases, task, methods, techniques and tools. It is the systematic study of
methods that are applied within a discipline. It also refers how to organize data from various
sources to complete a successful study.

Sources of data

The data is collected both from primary and secondary source.

Primary source

a) Personal observation and experience

b) Taken opinion from officials and co- worker

Secondary source

a) Annual report of SBL

b) Web site of SBL
c) Publications

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1.6 Limitations Of The Study

 Time constraint was one of the major drawbacks in the Study. The duration of the
Study was only three months which was very short. So, I could not go in depth of
analysis.
 Lack of comprehension of the respondents was the major problem that created many
confusions regarding verification of conceptual questions.

 Management/officials are not always that much helpful regarding their

confidential information.
 I am working in one branch. I don’t know what procedures other branches
are following and how they are managing their customers.

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 CHAPTER TWO
RESEARCH METHODOLOGY

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2.1 Research Methodology

This paper is based on both quantitative and qualitative data. A questionnaire

consisting of 15 questions have been designed to collect primary data. 30 representatives
have been selected from customers and employees of SBL as a sample by using random
sampling method. On the basis of data analysis, we identify some major findings. Finally
based on those findings we suggest some recommendations for the betterment of the
company.

2.2 Population Of The Study

There are 1175 branches of sonali bank in Bangladesh. There are 45 employees in
Kotbari branch. So, in this paper the population size is 45.

2.3 Sampling of the Study

A closed ended questionnaire was designed to collect the data. The survey was undertaken
randomly selecting 30 numbers SBL employees. The primary data was collected on the basis
of convenience sampling. The sample size of the study is 30.

2.4 Data Collection Method

Primary Data

Various types of the data and information were collected from my practical
experience and queries from the executives while doing my internship at The Sonali bank
Ltd. A questionnaire is made to collect Information and data regarding Overview of the
Sonali bank Ltd, evaluating criteria of Credit, credit disbursement, credit policy, credit limit,
recovery system of defaulters, sound credit, necessary actions to the defaulters, controlling
procedures over the credit etc. were collected from these sources. The questionnaire is added
to the appendix.

Secondary Data

Data regarding the Loan and Advance Management of Sonali Bank Ltd. were collected from
secondary sources like:

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  Annual Studys of Sonali bank ltd.

 Brochures

 Manuals and Publication of The Sonali Bank Ltd

 Annual Study of Bangladesh Bank,

 Books,

 Various businesses related articles and internet were the major sources of
secondary data.

2.5 Techniques of Data collection

For data collection “Interview Method” was used. Interviews were taken with the
employees and clients of SBL through questionnaire.

Questionnaire Design

All questions are related to the evaluation of the Loan and Advance Management of the
organization. Numbers are assigned to the scale for measuring credit risk of the organization.
In this Study, there are 10 questions. It is in the format of Likert Scale.

Likert Scale

After getting all the data tried to find out the percentage of the analysis and then Researcher
has presented that in a graphical way.

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2.6 Instruments Used in Analysis

There are some tools which are used in analysis. There are various figures, tables, charts,
which are easier to understand.

This overall process of the study is as follows:

Identifying Data Sources

Selection of the topics

Collection of data

Classification, analyse, iterpretation and

presentation of data

Finding of the study

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 CHAPTER THREE
LITERATURE REVIEW

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3.1 Literature review:
The researcher reviewed the below literatures from internet and relevant sources to
find out the research gap. These are given below-
Various researchers have contributed to the field of Loan and Advance, and have offered
intensive and profound knowledge on the branches of Loan and Advance such as loan, lend,
loan disbursement, loan recovery, loan workout, loan write off, and so on

a. According to D Stojanovic, MD Vaughan, TJ Yeager - Journal of Banking &

Finance, 2008.

Since the early 1990s, commercial banks have turned to Federal Home Loan Bank
(FHLBank) advances to plug the gap between loan and deposit growth. Is this trend
worrisome? On the one hand, advances implicitly encourage risk by insulating borrowers
from market discipline. On the other, advances give borrowers greater flexibility to managing
interest rate and liquidity risk. And access to FHLBank funding encourages members to
reshape their balance sheets in ways that could lower credit risk. Using quarterly financial
and supervisory data for banks from 1992 to 2005, we assess the effect of FHLBank
membership and advances on risk. The evidence suggests liquidity and leverage risks rose
modestly, but interest-rate risk declined somewhat. Credit risk and overall failure risk were
largely unaffected. Although the evidence suggest FHLBank membership and advances have
had, at best, only a modest impact on bank risk, we caution that our sample period constitutes
one observation and that moral hazard could be pronounced if leverage ratios revert to
historical norms.

b. According to T Davidson, WG Simpson - Journal of Entrepreneurial Finance, 2016

Adequate credit availability for small businesses is an important public policy issue
because small businesses are essential for employment and economic growth for the
economy. The Gramm-Leach-Bliley Act of 1999 includes a provision that could potentially
support financial institutions in the provision of credit to small businesses through the use of
advances from the Federal Home Loan Bank (FHLB) system that are secured with small
business loans. We explore the relation between FHLB advances to financial institutions and
the provision of loans to small businesses. We find a positive link between the change in
FHLB advances and the change in small business loans and the level of FHLB advances and
the level of small business loans. This relation holds for large and small banks and pre- and
post-2007 recession. However, we find that the change in the proportion of small business
loans to assets is only positively related to the change in the advances to assets ratio prior to
the recessionary period. This suggests that banks substitute small business loans for other
types of assets during relatively normal economic periods, but FHLB advances are a source
of wholesale funds that will be invested in the most attractive financial assets available with
no preference for any particular asset during periods of contracting credit.

c. According to M Rahman - Financial Engineering eJournal, 2019

Loans and Advance section of a bank is very important because the success of this
department helps to increase its business. If this section does not properly work, the bank

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itself may become bankrupt. Bank makes loans and advances mostly to traders, businessmen,
and industrialists. Although the nature of credit may differ in terms of security requirement,
disbursement provision terms and conditions etc. To ensure secured banking Agrani Bank
Limited works closely with its clients, the regulatory authorities, the shareholders, other
banks and financial institutions. This bank recently achieved lots of milestones rather than
other banks. The credit administration of this bank works very efficiently where loan
documentation is performed by the experienced bankers. Presently the management is
focusing on reducing Non-performing loans (NPLs) which is a big step of loan recovery.
Apart from these, Agrani Bank Limited provides other services and some kinds of value
added services for the welfare of the people. However, Loan and Advances is the most
important asset as well as the primary sources of earning of a bank which help to improve
financial health of a bank.

d. According to P Roy - 2019 - dspace.daffodilvarsity.edu.bd

As a prerequisite of MBA program, I have made my internship report. This report is made
dependent on my three months temporary job in Sonali Bank Limited. Nature of lalmatia
branch (SBL) is great and neighborly. The Sonali Bank Limited is one of the main open
Banks working in Bangladesh. Every one of the parts of loan and advances exercises of SBL
like; loaning exercises, procedures of advance, recuperation procedure of various sorts of
advance and so forth have been appended to this report. Still I've done bunches of monetary
figuring’s, reviewed their money related reports and from my step by step working
background. Subsequent to creating the report, I had a few discoveries with respect to the
Loan and Advances Performance Analysis of Sonali Bank Limited. As an unpracticed
individual I may have committed numerous errors in those discoveries, whatever I felt from
my perspective, I just brought up those.

e. According to F Ahmad, S Tahir, B Aziz - … Research Journal of Social Science &

Management, 2014

This paper described the effect of Loan loss provision on the stability and performance of
banks working in Pakistan. My results described the loan loss provision as an important
factor in affecting profitability of banks in ideal condition, a well establish bank is supposed
to be having less loan loss provision and higher profitability moreover bank deposits and its
advances also play a vital role in the stability and profitability of banks. In first Bank
profitability was dependent variable and was get 2 significant results and 3 insignificant
results. In second ROA was dependent variable and was get 2significant and 3 insignificant
results, In third ROE was dependent variable and was get 1 significant and 4 insignificant
results.

After researching the literature review the supervisor and the researcher finalized the loan
and advance management.

3.2 History of loan and advance

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 The history of loans began thousands of years ago with farmers using seeds and grains
to borrow capital and livestock as repayment options. Since then, the lending process evolved
into a complex financial procedure before progressing into a modern, streamlined system in
the digital era. The history of business loans is key to discovering what lies ahead. Here we’ll
take you through a brief history of loans and outline the key turning points that shaped the
lending market we see today. Did you know, the history of loans can be traced back to 3,000
years ago!? Since the beginning of civilization itself, lending has been lurking around in
some shape or form. The history of lending has shown us that the huge progress of
civilization would not be where it is today without loans acting as the igniting fuel.

Where were loan invested

The very earliest example of lending dates back to over 4,000 years ago in
Mesopotamia, 2,000 BCE, where the very first payday loans were used by farmers. Whether
or not loans existed in a small tribe or unknown civilization before this is a mystery, but
2,000 BCE is the very first evidence that we have recorded. Now, seeing as one farmer’s seed
could yield a plant with hundreds of seeds, farmers began to borrow seeds issued against a
later payment. This was used in a similar manner with animals where the repayment was
issued with the birth of a new calf.

1754 BCE: Mesopotamia – First interest rates

Sumerian temples actually went on to function not only as places of worship but as
banks – and this is where the very first large-scale systems of loans and credit began. As the
city grew, so did the complexity of the people’s needs and lending agreements and so the idea
of charging interest was developed. Silver at this time began gaining popularity, but unlike
calves and grain, did not naturally gain interest. This is where the Code of Hammurabi
(issued by the 6th Babylonian King) came in, defining the price of silver and how the interest
charged on silver loans was to be regulated.

321BCE:India–Thefirstbillofexchange

One of the earliest ever recorded examples of a bill of exchange was in India. A bill of
exchange involves a written order that is used to bind one individual to another instructing
the payment of a fixed sum of money at a predetermined date. In the Maurya dynasty,
merchants of large towns would give letters of credit to one another which also helped issue
bills of exchange to foreign countries for sea-borne trade.

400 BCE: Ancient Greece – The first payday loans

One of the oldest lending methods can be found in Ancient Greece where
pawnbrokers lent money by collecting collateral from a borrower and reducing the risk of the
lender. This is something we still use today with when it comes to secured business loans. If
you’re looking for a loan and not wanting to use collateral, however, you would need to use
an unsecured business loan.

1400 AD (Middle Ages) – Lending outlawed

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 In this period of time, the largest form of authority came from religion, be it the
Christian bible throughout Europe or the Qur’an in the Middle East. Both religions banned
the practice of lending (or lending with interest outright) however, the Jews’ Torah permitted
lending, though only allowed for interest to be charged with non-Jews. With Jews being the
only people allowed to lend money, they soon gained a rather nasty reputation which is
arguably what lead to their persecution. This continued into the 18th century and over time,
the huge economic benefits of lending were slowly realized. This led to the dilution of
restrictions and the traditional banking functions that we know and appreciate today.

Mid-18th century: Industrial Revolution – Birth of international finance

By the 18th century, lenders still used collateral but there was a big shift to indentured
loans. In this practice, the rich lent to the poor and the borrower then had to work off their
debt. With international trade booming, the banking world had some catching up to do.
Greater controls were needed and Mayer Amschel Rothschild is largely responsible for
pioneering international finance through the establishment of centralized banks. He cleverly
shipped his sons off across the major European cities of the time (Frankfurt, Naples, Vienna,
France, and London) to set up banks in each city. The 1800’s went onto usher in a new era of
lending to make loans more widely available to the average Joe (thank goodness!). In 1816,
the Philadelphia Savings Fund Society in the US opened its doors as a loan resource and
became the very first savings bank in the US.

Mid-20th Century Loans: Cards are the new silver

The mid-20th century saw yet another shift in modern-day lending but this time, to
financial data. In 1950, Frank McNamara made history when he paid a restaurant bill with a
cardboard card, now known as a Diners Club® Card. A few years later the Bank of America
started launching the BankAmericard, the good old fashion Visa. By 1959 FICO scores were
widespread and used by lender to evaluate mortgage loans.

3.3 Role of Loan And Advance In Economic Development

The attention of regulators and policymakers has been also drawn to the problems of
access to credit for businesses, including SMEs, which have been negatively affected in many
countries by credit restrictions. Research conducted in the post-crisis period highlights the
important role of relationship banking in counter-cyclical lending activities, particularly in
the SME segment. The relational business model is characteristic of smaller banks, including
the cooperative banking segment, whereas large scale, in the case of global banks, involves a
transactional approach. Banking in CEE is dominated by foreign-owned, large global banks,
which may discriminate against business-oriented loans. Moreover, global institutions may
not be efficient in processing the soft information required by riskier corporate lending. On
the global scale, large enterprises are able to finance their growth from non-bank sources. In
the less financially sophisticated CEE region, the availability of bank loans, particularly to
small firms, is crucial for investments and for generating sustainable economic growth.
Cappiello et al. (2010).

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 CHAPTER FOUR
PROFILE OF
THE SONALI BANK LIMITED

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2.1 Historical Background Of Sonali Bank Limited

In the area of Mughal and East India Company in India, banking got organized. The
bank of India Namely the Hindustan Bank was established in 1948. The State Bank of
Pakistan was established after partition of India into two India and Pakistan. Then on March
26th 1971 Pakistan has partitioned into two, Pakistan and Bangladesh. In Bangladesh,
“Bangladesh Bank” has established 1971 in the area of Bangladesh. “The Eastern Mercantile
Bank” has established in 1949 as first one.

Soon after independence of the country Sonali Bank emerged as the largest and
leading Nationalized Commercial Bank by proclamation of the Banks' Nationalization Order
1972 (Presidential Order-26) liquidating the then National Bank of Pakistan, Premier Bank
and Bank of Bhwalpur. As a fully state owned institution, the bank had been discharging its
nation-building responsibilities by undertaking government entrusted different socio-
economic schemes as well as money market activities of its own volition, covering all
spheres of the economy.

The bank has been converted to a Public Limited Company with 100% ownership of
the government and started functioning as Sonali Bank Limited from November 15, 2007
taking over all assets, liabilities and business of Sonali Bank. After corporatization, the
management of the bank has been given required autonomy to make the bank competitive &
to run its business effectively.

Sonali Bank Limited is governed by a Board of Directors consisting of 11(Eleven)

members. The Bank is headed by the Chief Executive Officer & Managing Director, who is a
well-known Banker and a reputed professional. The corporate head quarter of the bank is
located at Motijheel, Dhaka, Bangladesh, and the main commercial center of the capital.

As an organization the Sonali Bank Limited has earned the reputation of largest state
owned commercial bank in Bangladesh. It is pioneer in introducing many new products and
services in the banking sector of the country. The Bank continued to grow and diversify its
portfolio in recent times to have diversified client base.

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2.2 Corporate Profile Of Sonali Bank Limited

Name of the Company : Sonali Bank Limited

Chairman : Mr. Md. Ashraful Moqbul

CEO & Managing : Mr. Md. Obayed Ullah Al Masud

Director
Company Secretary : Mr Md. Ataur Rahman

Legal Status : Public Limited Company

Genesis : Emerged as Nationalised Commercial Bank in 1972,

following the Bangladesh Bank (Nationlisation) Order
No. 1972 (PO No.26 of 1972)
Date of Incorporation : 03 June, 2007

Date of Vendor's : 15 November, 2007

Agreement
Registered Office : 35-42, 44 Motijheel Commercial Area, Dhaka,
Bangladesh
Authorised Capital : Taka 6000.00 Crore

Paid-up Capital : Taka 3830.00 Crore

Number of Employee : 18,806

Number of Branches : 1211

Phone-PABX : 9550426-31, 33, 34, 9552924

FAX : 88-02-9561410, 9552007

SWIFT : BSONBDDH

Website : www.sonalibank.com.bd
E-mail : itd@sonalibank.com.bd

17 | P a g e
4.3 Some Notable Features Of Sbl

Notable Features of SBL

Capital Structure:
Authorised Capital : Tk. 6000.00 Crore
Paid up Capital : Tk. 3830.00 Crore

Branches & Subsidiaries:

1 Total No of Branches 1211  
  a. No of Foreign branches 2
  b. No of Local branches 1209
       
    i) No of Rural Branches 743
    ii) No of Urban Branches 466
2 No of Regional Offices 16
3 No of Principal Offices 46
4 No of G.M. Offices 11
     
Subsidiaries:

1. Sonali Exchange Company Incorporated (SECI) having 10 (Ten) branches in USA.

2. Sonali Investment Limited (Merchant Banking) having 4 (Four) branches at Motijheel, Paltan,
Uttara, Mirpur in Dhaka and 1 (One) branch in Khulna, Bangladesh.

Associates:

1. Sonali Bank (UK) Limited having 2 (Two) branches in UK.

2. Sonali Polaris FT Limited

Representative Offices :3 : 1(One) in Jeddah, KSA;

1 (One) in Riyadh, KSA
and 1 (One) in Kuwait.
Correspondence : 639

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4.4 Organizational Structure Of Sonali Bank Limited

Managing Director

Deputy Managing Director

General Manager

Deputy General Manager

Assistant General Manager

Senior Principal Officer

Principal Officer

Senior Officer

  
Cash Officer General

 
Cash Officer
 
Head Cashier Sub Accountant
 
Senior Cashier Cum Clerk Senior Clerk
 
Cashier Cum Clerk Clerk

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4.5 Mission, Vision And Slogan Of SBL
Mission

Mission is to dedicated a whole range of quality products that support divergent needs
of people aiming at enriching their lives, creating value for the stakeholders and contributing
towards socio-economic development of the country.

Vision
Vision is to be socially committed leading banking institution with global presence.
Slogan
Your trusted partner in innovating banking.

4.6 Objectives Of Sonali Bank Ltd

Sonali Bank has a various types of objectives. Important objectives of Sonali Bank are
as follows:

 Collection of deposit

 To secure deposit

 To inspire savings

 To control loan

 Expansion of trade and commerce

 Helps in industrialization

 Increase the capital formation

 Provide the customer service

 To analyzed the idle fund to proper in restrict

 To earn profit

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4.7 Management Of Sonali Bank Ltd

The management of Sonali Bank is very systematic for operating banking function.
The management of bank consists of a board of directors. A board of directors of Sonali Bank
consists of 10 members. They are selected annually.
Directors formulate the major policies of the bank and select officers whose duties are to
execute these policies and to conduct the routine operations of the bank. They are responsible
for the diligent fair and prudent administration of the institution’s officers.
Officers are appointed by the board of directors and they do the banking function
according to the directions of the board of directors.

Deputy Director (DMD)

General Manager

Deputy General Manager

Assistant General Manager (AGM)

Senior Principal Officer

Principal Officer

Senior Officer

Officer

Figure 1: Management of Sonali Bank Limited

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4.8 Functions Of Sonali Bank Ltd
There are various functions of Sonali Bank. These functions are as follows:

i. Collection of money on deposits.

ii. Conducting cash transaction of customers who have current accounts.

iii. Attending bills of exchange and drafts of customers

iv. Sanction of loan

v. Providing other services to the customers:

a. Transfer of money

b. Collection of receipts

c. Collecting interest, dividends, rents, pensions, etc.

d. Sales and purchase of share, bond and debenture.

e. Act as an advisor.

4.9 Credit Ratings Of SBL

As per Bangladesh Bank’s mandatory requirement vide BRPD Circular No.06 dated
05 July, 2006, credit rating of Sonali Bank Limited was done by the Emerging Credit
Rating Ltd. on the audited Balance Sheet as on 31-122016 and other related information.
The rating of the Study is as under.

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 Credit Rating Study
2016-17 2015-16
Long Sho Long Short
Surveillance Rating Term rt Term Ter
Ter m
m
Entity with Government AAA ST-1 AAA ST-1
Support
Entity without Government A- ST-2 A- ST-2
Support
Outlook Stable Stable
Date of Rating 30 June 2017
Expiry Date 29 June 2018

AA An institution rated AAA has an exceptionally strong capacity to meet its financial
A: commitments and exhibits a high degree of resilience to adverse developments in
the economy, and in business and other external conditions. These institutions
typically possess a strong balance sheet and superior earnings record.
A- An institution rated A- has a strong capacity to meet its financial commitments but
: is somewhat more susceptible to adverse developments in the economy, and to
business and other external conditions than institutions in higher-rated categories.
Some minor weaknesses may exist, but these are moderated by other positive
factors.
ST-1 An institution rated ST-1 has a superior capacity to meet its financial commitments
: in a timely manner. Adverse developments in the economy and in business and
other external conditions are likely to have a negligible impact on the institution`s
capacity to meet its financial obligations.
ST-2 An institution rated ST-2 has a strong capacity to meet its financial commitments in
: a timely manner; however, it is
somewhat susceptible to adverse developments in the economy, and in business and
other external conditions.
Emerging Credit Rating Limited (ECRL) has affirmed AAA (Triple A) long term credit
rating and ST-1 short term credit rating with a Stable outlook to Sonali Bank Limited as a
government supported entity. However, as a commercial bank without government support,
ECRL has affirmed A- (Single A minus) long term credit rating and ST-2 short term credit
rating with a Stable outlook to Sonali Bank Limited.

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4.10 Sonali Bank Kotbari Branch Overview

PROFILE OF KOTBARI BAZAR BRANCH, CUMILLA

Kotbari Bazar Branch, Cumilla is one of the essential branches involved in banking
business and future prospects among 1211 branches of Sonali Bank Limited. From the
starting banking operation of this branch contributes a lot to the overall achievement of the
bank.

EMPHASIZE OF KOTBARI BRANCH, CUMILLA

This branch is situated at Kotbari, Cumilla. It covers all the area both urban and rural
area. The customers are very happy to get this branch and customers are also very loyal to
this branch. The employees of this branch are also well indeed. It holds so many well reputed
companies account. The outlook of this branch is also wonderful. Consequently, this branch
is increasing profit day by day.

OBJECTIVES OF KOTBARI BRANCH, COMILLA

 It was to maintain a huge number of objectives that are shown below—

 Maintaining all activities in discipline way

 Provide customer satisfaction as much as possible

 Profit maximizing

 Provide effective services to the customer

 To create more loyalty of the customer

DEPARTMENT OF THIS BRANCH

The following departments are available in this branch

Account opening department

Cash zone

Loan & Advance Department

Foreign Remittance department

Bills and Inland dept.

Account Department

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WHY THIS BRANCH IS PREFERABLE TO THE CUSTOMER

This branch is more preferable to the customer. It is situated in a central point. So The
urban and rural people get their required services. The branch is improved in all Grade
because of its proper services. The grading point is given based on the number of voucher, no
of A/C, no of customer and the level of performance etc. All of the employees in this branch
are friendlier. They try to provide highest services to the customer. As a result the loyalty of
customer is increased about this branch.

Total deposit & Advance

Particular Amount

Total Deposits 320,666,963.11

Total Advance 46,093,251.11

Less Interest Suspense 0.00

Total Net Advance 46,039,251.11

Table 1: Total deposit & Advance

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Financial Statement Of Kotbari Branch, Comilla

Amount(T
Liabilities Amount(Tk) Assets k)

Cash & Bank

Deposit Balance

Current 30,863,808.30Total Cash in Hand 3,535,810.69

2,90 Loan &

Sundry Deposits 9,368.84 Advances

172,36 Loan against Rural

Saving Deposit 3,159.94 Credit 612,603.00

3,56
Short Term Deposits 5,368.26Loan General 17,285,865.11

48,183 Loan against Stuff

Fixed Deposits ,612.00 Housing 189584.00
Building

44
JB Pension Scheme ,117.00Total 18,470,387.11

JB Deposit Scheme 21,250,300.00

Advance
JBMSS 1,499,629.00 Overdraft

JBSBSS 155,998.42OD Secured 6,834,684.00

JBMAP 14,911,418.00Cash Credit 20,734,180.00

JBDBS 22,535,934.00Total 27,568,864.00

JBMBS 2,384,250.00 Other Asset

Total Deposit: 320,666,963.76Furniture & Fixture 245,169.00

Bill PayableSuspense Account 120,260.68

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Pay order issued 179,814.00Advance Deposit 1050.00

DD Payable 12,551.00Computer 410,012.00

Total Bill Payable 192,365Total 776,491.68

Other liabilities CONTRA

Intt Payble Account 500,950.00 Bills Lodge Inward 274,560.00

Bills For Collection

Inword 274,560.00 H.O. A/C

Computerized Inter
HO Account 97,560,552.78 BR. Train 361,017,059.72
A/C

Sundry Asset A/C 7,552,218.34

Grand Total 419,195,391.54Grand Total 419,195,391.54

Table 2: Financial Statement Of Kotbari Branch, Comilla

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 Number Of Clients Of This Branch

Name of the accounts Number of accounts

Current deposit 203

Savings deposit 5295

Fixed deposit 111

JB Monthly Benefit Scheme 5

Short time deposit 10

JB Savings pension scheme 2

Loan & Advance 74

JBDS 143

JBMSS 22

JB School Bank Saving A/C 89

DBS 47

MAP 115

TOTAL 6042

Table 3: Number Of Clients Of This Branch

4.11 Credit Policy and Procedure of Sonali Bank

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 The credit policy pursed by Bangladesh Bank is to be aimed at ensuring development
of scare Bank resources in the best possible manner for increasing Production, employment
and Real income within its objectives. Both selective and qualitative credit can't were adapted
to the socio-economic priorities, distributive and justice need for containing money supply
within a safe limit.

Sonali Bank Limited takes the policies, which help the development of several sectors
of the country under general credit division and for achieving the proposed goals of the
principles of Agricultural, Economical, Industrial and Trade following the guide lines of
Bangladesh Bank, this is the credit policy of Sonali Bank Limited. This policy is changeable.
If Bangladesh Bank resists providing credit in any sector Sonali Bank Limited does not
provide any credit in those sectors.

Credit
The word “Credit” is derived from the Latin word “Creditum” meaning “I believe”.
The term may be defined broadly or narrowly. More generally the term credit is used
narrowly for debt finance. Credit is simply opposite of debt. Debt is obligation to make future
payment. Credit is the claim to receive the payments. Both are created in the same act of
borrowing and lending.
Speaking broadly, credit is finance made available by one party (lender, seller,
or shareholder/owner) to another (borrower, buyer, corporate or non-corporate firm).Credit
can also be defined as the provision of resources (such as granting a loan)by one party to
another party where that second party does not reimburse the first party immediately, thereby
generating a debt, and instead arranges either to repay or return those resources (or
material(s) of equal value) at a later date. In a simple sentence, it is any form of deferred
payment.

Models of credit
Loans and advances primarily have been divided into two major groups. One is
continuous credit and another is fixed term loans. Continuing credits are the advances having
no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory
performance. Fixed term loans are the advances made by the bank with fixed repayment
schedules. The term loans are defined as follows:

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 Short term Up to 12 months.
Medium term More than 12 up to 36 months
Long term More than 36 months.

As initiated by Bangladesh Bank BCD Circular NO. 8 dated 25.04.94 different kinds
of lending were subdivided into 7 categories for fixation of rates of interest by the individual
banks on competitive basis depending on the cost of funds, prevailing market condition and
monetary policy of the country.

The guidelines of the credit policy

Our Vision: Socially committed leading banking institution with global presence.
Our Mission: Dedicated to extend a whole range of quality products that support divergent
needs of people aiming at enriching their lives, creating value for the stakeholders and
contributing towards socio-economic development of the country. Continuous development
of Information and Technology to meet the demand and challenges of the time.

Objective of the credit policy

As guidelines of credit policy, the bank is to maintain their policy to provide loans of the
customer.
o Credit analysis
o Security
o Minimum level of risk
o Liquidity
o Selection of borrower
o Selection risk in lending
o Risk management
o Credit rating
o Loan pricing

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Principles of credit policy
The principle of credit policy of the Sonali Bank maintains some condition which is the
main activity of the policy. These are mentioned in the following:

 Safety
The first guiding principles of a Banker should be "Safety First", so far as his advances
are considered, because the very existence of a Bank depends of the Safety of its outstanding
which should never, therefore, he sacrificed to the profit earning capacity of its advances.
Consequently to maintain a Banking concern in sound condition, it is very essential that the
safety of its advances to customers should be above suspicion. Extreme care should be taken
that the fund rent out are not subject to any risk or being lost. The Banker is to ensure in the
best possible manner that the money advanced by him goes to the right type of borrower and
is utilized in such way that it will not only be safe at the time of lending but will remain so
throughout, and after a useful purpose in the trade or industry where it is employed, is repaid
with interest.

 Liquidity
Bank's can invest in two types of terms viz. Long term and Short term. Banks feel very
risky in long-term investment. So, they normally invest in Short term investment to maintain
the liquidity of the Bank. The Liquidity of an Advance means its repayment on demand or on
due date or after a short notice. The loan must stand fair chances or repayment according to
the requirement achieve. It is almost important that Bank loan must be repaid as they become
due otherwise the liquidity position of the Bank is endangered. The major cause of Bank's
failure has been had liquidity. The period of the advance and the case with which it will be
repaid are very important. Even in the case of fully secured advances if it is feared from the
very beginning that the advances would only he recovered by selling the securities it is not
considered a good advances. It must, therefore, always ensure that the advance will be repaid
from resources other that the securities pledged.

The basic problem in advance Viz. Graduate Reeducation and eventual repayment is the crux
of the whole matter. A Banker would be failing in his duty to safeguard the interest of his
depositors and the shareholders if his credit policy does not take full cognizance of this

31 | P a g e
problem and not provide a method for gradual repayment and final recovery of the money
advance.

 Profitability
Equally important is the principle of profitability in Bank advances. Like other
Commercial institutions, Banks must make profit where there is no profit banks don't invest.
Firstly, they have to pay interest on the Deposits received by them. They have to incur
expenses on establishment stationery etc. They have to make provision for depreciation of
their fixed assets and also for any possible bad or doubtful debts. After meeting all these
items of expenditure, which enter the running cost or Bank, a reasonable profit must be made.
The landing rate of Bank is based on all these considerations. It is sometimes possible that a
particular transaction may not appear profitable in itself, but there may be some ancillary
business available, such as deposit from the borrower other concerns or his foreign exchange
business, which may highly remunerative. In this way, the transaction may on the whole be
profitable for Bank.

 Purpose
Another significant principle which is to be kept in view when advancing is the Purpose.
The purpose for which lending is made should he productive as to ensure definite source or
repayment. Banks discourage advances for Harding Stocks or for Speculative activities.

There are obvious risks involved therein apart from the antisocial nature of such transactions.
The Banker must closely scrutinize the purpose for which the money is required and ensure
as far as he can, that the borrower applies the money borrowed for a particular purpose
accordingly. Purpose has assumed a special significant in the present-day concept or
Banking.

 Diversification of Risks
The security consciousness of a Banker and the integrity of the Borrower are not adequate
factors to keep the Banker on safe side. What is more important is the diversification of Risk.
This means, he should not lend a major portion of his loan able funds to any single Borrower
or to an Industry or to one particular Region. In fact, the entire Banking business is one of

32 | P a g e
taking calculated risks and a successful banker is an expert in assessing such risks. He is keen
on spreading the risks involved in lending over a large number of Borrowers, over a large
number of Industries and Areas, and over different types of securities; the advances must not
be in one particular Industry. Too many eggs should not be placed in one basket, because any
adversity faced by that particular Industry will have serious effect on the Bank. Slump does
not normally affect all Industries and business simultaneously.

 Security
Whenever a money lender lends money he must be consider carefully the changes of his
being repaid by the Borrower and is therefore not normally content to rely on the obligation
or the Borrower alone but wants some tangible security from which he can obtain repayment
in case the Borrower is unable to meet his obligations. Without taking such security the
business of money lending would be too speculative. The Banker also making advances and
loans naturally wants to secure him by some reliable security. Security is considered as
insurance or a caution to fall back upon in case of emergency.

Bankers may realize it and reimburse themselves if the well calculated and certain source
of repayment unexpectedly fails. It is, however, incorrect to consider an advance proposal
from the point of view of security alone. An advance is granted by a good banker on its own
merits, that is to say with due regard to its safety, capacity liquidity purpose etc. and after
looking in to the character, capacity and capital or the Borrower and not only because the
security is good.

 Sources of Repayment
A sound credit is one where timely repayment is assured. So, before giving financial
accommodation, a Banker should consider the source from which repayment is promised. In
some instances, debentures, which are to be redeemed in few month times or a lire policy,
which is to mature in near future, may be offered as security. Advances against such security
give no trouble.

Sometimes customers may apply for loans for additional Working Capital for their
business and undertake to repay out of the profits over a period. In such cases, the Rate at
which the customer can reasonably hope to repay should be ascertained. An examination of

33 | P a g e
the audited accounts may guide the Banker in knowing the repayment capacity of the
customer.

 Suitability
Even when an Advance satisfies all the aforesaid principles it may still not be suitable.
The Advance may be encountered to National interest. These Principles may have to be
amended to a certain extent. Suitability of Advance from National viewpoint has therefore
come to be regarded as a basic principle of Lending.

 The Integrity & Reliability of the Borrower:

The last and the most fundamental principle of lending are the integrity and reliability of
the borrower. To avoid bad debt, it is the basic factor before any loan proposal can be
considered. The success of any business depends upon the ability of the Banker to study
borrowers. The study of a borrower involves the study of the five C's of the Party. This five
C's refer to Parties:

 Character

 Capacity

 Capital

 Conduct &

 Capability

Instead of five C's some authors mention the five R's. This five R's indicates Parties:

 Reliability

 Responsibility

 Resources

 Respectability &

 Return

 Pledge
According to the section 172 of the Contract Act, when a borrower surrenders his
business goods to the banker’s custody as the security of loan given by the bank then it is
called pledge. The pledged goods remain with the possession and control of the bank and the

34 | P a g e
client draw the goods in case of need with the permission of the bank by repaying adequate
amount of loan. Bank usually permits drawing power (DP) to the borrower to draw the goods
from its custody after checking the stock Study. In case of default, bank deserves the right to
realize the loan by selling the pledged goods. Bank creates this charge based upon the letter
of pledge which has been taken from the bank borrower before disbursement.
 Hypothecation
When loan is given to the borrower against hypothecated possession of goods then it is
called Hypothecation. The physical possession and control remain with the borrower’s
custody. Bank creates charge over the hypothecated goods in case of default. For creation of
this charge bank takes the letter of hypothecation from the borrower.

Types of loan

Loan means lending money to someone on trust. The Sonali Bank provides the
following kinds of loans to the customers.

 Cash Credit

A cash credit is a fluctuating account and is operated in the same way as a current account
on which an overdraft has been sanctioned under this system the banker specifies a limit
called the cash credit limit for each customer up-to which the customer is permitted to borrow
against the security of tangible assets or guarantee, the interest rate is 16%. The number of
cash credit loan of Sonali Bank ltd Corporate branch is amounting Tk. 64,34,00000.

This cash credit may either take the form of pledge or hypothecation. In case of pledge, the
possession of the goods is delivered to the creditor and in case of hypothecation possession of
goods is not transferred to the bank. Therefore such advance is not better than a claim loan.

 Over Draft

When a bank gives opportunity to his customer to withdraw a specific amount of money
over his bank account balance, then it is called overdraft. Normally bank takes a security for
overdraft against fixed deposit receipt (FDR), Sanchay Patra, Deposit Pension Scheme (DPS)
and Sonali bank Special Deposit and Pension Scheme (SDPS). Normally a customer can take
80% loan against FDR, DPS and Sanchay Patra, 90% loan against SDPS. Now bank pays
most of the overdraft against FDR and Sanchay Patra.

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Overdraft may be of the following three types:

 Temporary overdraft

 Clean overdraft

 Secured overdraft

 Amount of overdraft is Tk. 74,27,963.73 and No. of account in 31/07/2013

 Demand Loan

A customer can take loan in installment under demand loan. Demand loan is of two kinds.
They are:

i) Provident fund loan

ii) House building loan (HBL), [staff and non-staff]

The size of the demand loan is 76,362.70 in 31/07/2013 and the interest rate is 11%.

 Staff Loan

Those staffs are employed in this branch, In against of Bangladesh Bank rate of interest,
this loan is granted to Sonali Bank staff, its interest rate is subject to change according to
Bangladesh Bank rate. The following types of loan are supply to the staff:

 Clean demand loan against provident fund balance. Where no interest rate.
 Motor cycle/cycle loan. This loan against interest rate is 5%.
 House building loan. This loan against interest rate is 5%.
The amount of staff loan is Tk 8,89,095.00 in .

 Small Loan
It refers to the loan given to small traders, and other self-employed persons. The
interest rate is 15%. The number of small loan of Sonali Bank is amounting Tk. 48,66,565.98.

 Agricultural Loan

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Role of nationalized commercial bank in agricultural financial is quite wide and extensive. It
is given for short term, medium term and long term purpose as mentioned.

a) Short term loan ranging from 6 to 18 months generally purchasing manocuvres,

fertilizers, and seeds and preparing soil.

b) Medium term loan ranging for a period over 18 months generally direct for fish
production, Horticulture, starting a dairy farm poultry farm etc.

c) Long-term loan ranging from over 5 years to 15 years generally for the major
improvement of land, shallow tube wells; deep tube wells and construction of grain
storage.

 Interest Rate of Agriculture Loans are

a) Crop loan rate is 8%.

b) Other agriculture loan rate is 8%.

c) B.R.D.B rate is 9%

d) Small loan rate is 9%

e) Others rate is 9%

Other Loan

a) Working capital loan

b) Small and cottage industry loan

c) Transportation loan

d) Potato storage in cool storage loan

e) Brick field loan

f) Jewelries loan

g) Rural credit

Procedure
The conditions which are mentioned in this branch for issuing loan are:

 Name and address of the borrower.

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  Nature of debt.

 Amount of debt.

 Primary deposit

 Term of loan.

 Margin.

 Interest rate.

 Special conditions.

Preparation of Loan Proposal

To get Advances or loans from Banks, it is not very easy way to acquire. It demands
some preparation from the Borrower. Because which the amount is sanctioning by the banks
is not of its own. The public deposits this amount, so it is very risky for Bank to lend this to
the Borrower. If the Bank fails to recovery that money then it should be paid from its own
fund. As a result, Banks fixed a systematic way to minimize this lending risk and try to
proper use of the money. Proposal requires:

 Loan Application.

 Required Paper as per Ownership of the Industry.

 Schedule of Mortgage Properties and Relevant Papers.

 Market reputation.

 Other Bank opinion about the previous money Lending.

 Feasibility Study.

 Lending Risk Analysis.

 Financial spread sheet analysis.

 Credit scoring.

 Forwarding.

 Valuation of Certificate.

 Trade License & CIB Study.

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  Commercial Invoice.

 Certificate of Origin.

 Memorandum of Association & Articles or Association.

 No objection Certificate from Local Authority and from Ministry of Environment.

 C.S, R.S & S/A of Land.

 Mutation Certificate.

 Affidavit and Personal Guarantee.

 General Irrevocable Power of Attorney.

Loan Sanction, Disbursement and Recovery Procedure almost same as General Advances.

Working Capital Management involves the financial and Management of the Current assets
of the Firm/industry. A Firms/industries ability to properly manage Current assets and the
associated liability obligations may be determine how well it is able to survive in the short
run, When a Firm/industry is unable to meet its current assets (payment of labor, raw
materials etc.) then the Firm/Industry to the Bank for Working Capital. After proper
investigation, Bank sanctions Working Capital for that Firm.

Since 1973-74 Sonali Bank Limited started to disburse in Agricultural Credit Program. The
lion share of the disbursed credit goes for crop; the credit is being disbursed in a limited scale
for the income group under various programs.

Interest Rate Policy

Bank takes the policy of the rate of interest only for encouraging the rural savings or
investment. If the rate of interest is low, the velocity of money will be increased.

The interest rate on Loan and advances has been rescheduled according to the following table
effective from 1 August approved in the 877th board meeting of Director held on 03 may
2009 and all other interest rates which were effective before will be deemed invalid.

Nature of deposit/loans & advances Rescheduled interest

rate (effective from
03-05-2009)

1. Savings Deposit 5%
2. Short Term Deposit 4%

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 3. From 3 months and above but less than 6 months 8.50%
From 6 months and above but less than 1 year 8.75%
From 1 years and above but less than 3 year 9.00%
6.25%
4. DPS 15%
5. SDPS
a) 5 Year Term 10%
b) 10 Year Term 12%
Table 4: Nature of deposit/loans & advances
6.Others loans Interest rate (Effective from 03 may 2009)
A.Commercial loans 13%
B.House Loans(Residencial) 13%
C.House Loans(Commercial) 13%
D.Loans provided to food ministry 13%
E.Transportation Loans 13%
F.Loans Provided to BADC 13%
G.Bridge Financing 13%
H.Others Commercial Loans 13%

The Instrument which are Necessary for Issuing Debt

 DP note unlading stamp

 Letter of continuity

 Letter of arrangement

 Letter of disbursement

 Letter of hypothecation

 Statement of monitoring signed by manager

 Memorandum of deposit title deed

 Power of attorney in case of failure to repay debt.

 Guarantee of owner of property

 A passport size photograph

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 CHAPTER FIVE
LOAN AND ADVANCE OF
SONALI BANK,
KOTBARI BRANCH

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42 | P a g e
5.1 Loan
An arrangement in which a lender gives money or property to a borrower and the
borrower agrees to return the property or repay the money, usually along with interest, at
some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and
generally the lender has to bear the risk that the borrower may not repay a loan (though
modern capital markets have developed many ways of managing this risk). A loan is a debt
provided by an entity (organization or individual) to another entity at an interest rate, and
evidenced by a note which specifies, among other things, the principal amount, interest rate,
and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of
time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called the
principal, from the lender, and is obligated to pay back or repay an equal amount of money to
the lender at a later time.
So, loan can be defined that, a thing that is borrowed, especially a sum of money that
is expected to be paid back with interest is called loan.
Another definition is also that, a loan is money, property or other material goods
given to another party in exchange for future repayment in the loan.

5.2. Advance
Advance is a “credit facility” granted by the Bank. Banks grant advances largely for
short-term purposes, such as purchase of goods traded in and meeting other short-term
trading liabilities. There is a sense of debt in loan, whereas an advance is a facility being
availed of by the borrower. However, like loans, advances are also to be repaid. Thus a credit
facility- repayable in installments over a period is termed as loan while a credit facility
repayable within one year may be known as advances. However, in the present lesson these
two terms are used interchangeable.
So, we can define advances that, Sums paid or received before the fulfillment of an
obligation, such as supply of goods or provision of services are called Advance.
Another definition is that; an advance is a payment made in advance of the
performance of any associated service or product delivery.

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5.3 What is Loan and Advance Management?

Loan and Advance management is the procedure of maintaining balance of repayment

effectively and efficiently which contains.

 Identification
 Measurement
 Aggregation
 Planning and management
 As well as monitoring of the risks arising in a bank's overall business 

5.4 What is Loan and Advance Management process?

Loan and Advance Management process should cover the entire credit cycle starting from
the origination of the credit in a financial institution's books to the point the credit is
extinguished from the books.  It should provide for sound practices in:

 Credit processing/appraisal
 Credit approval/sanction
 Credit documentation
 Credit administration
 Disbursement
 Monitoring and control of individual credits
 Monitoring the overall credit portfolio (stress testing)
 Managing problem credits/recovery (Bank of Mauritius, December 2003)

5.5 Guidelines for Credit Risk Management by Bangladesh Bank

In February 2012 Department of Off-site Supervision of Bangladesh Bank issued

"Risk Management guidelines for Banks" (Bangladesh Bank, 2012) for all scheduled
banks in Bangladesh. These guidelines are issued by Bangladesh Bank under section 45 of
'ব্যাংক কোম্পানি আইন, ১৯৯১' and introduced to provide a structured way of identifying and

44 | P a g e
analyzing potential risks, and devising and implementing responses appropriate to their
impact. Summary of Some of the important CRM guideline are presented here.

5.6 Loan and Advance Management framework

A typical Loan and Advance Management framework in a bank may be broadly

categorized into following main components:
a)  Board oversight
b)  Senior management's oversight
c)  Organizational structure
d)  Systems and procedures for identification, acceptance, measurement of risks
e)  Monitoring and control of risk

5.7 Counterparty Limits

The issue of counterparty limits arises from the risk that a customer with whom an
organization had a reciprocal agreement defaults. Credit risk is the risk that the counterparty
to a financial transaction - here a foreign exchange contract, may become unable to perform
as per its obligation. The extent of risk depends on whether the other party's inability to pay is
established before the value date or is on the same value date of the foreign exchange
contract. In Sonali Bank counter party limit is determined by the board of directors. In
determining the limit board considers the creditworthiness and relationship of counter party.
If the limit cannot judge properly bank will have to face following risks,

5.8 Settlement risk

The risk on the settlement day that one counterparty pays funds or delivers a security
to fulfill its side of the contractual agreement, but the other counterparty fails on its side to
pay or deliver. This occurs when items of agreed upon original equal values are not
simultaneously exchanged between counterparties; and/or when an organization’s funds are
released without knowledge that the counter value items have been received. Typically the
duration is overnight/ over weekend, or in some cases even longer i.e., until the organization
receives the confirmation of receipt of funds. The risk is that the organization delivers but
does not receive delivery. In this situation 100% of the principal amount is at risk. The risk
may be greater than 100% if in addition there was an adverse price fluctuation between the
contract price and the market price.

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5.9 Pre-settlement risk
The risk that a client defaults on its agreement with the organization before the
settlement day. Whilst the organization has not paid away any funds, it still has to replace the
contract at the current market rates, which might have moved against it. In this case the
organization is exposed to possible adverse price fluctuations between the contract price and
the market price on the date of default or final liquidation. The organization’s loss would then
be the difference between the original contract price and the current market price on the date
of default.
All banking organizations must have appropriate counterparty limits in place for their
treasuries. The limit structure will depend on each organization’s credit risk appetite based on
their credit risk policies as well as target market criteria. All such credit risk limits should be
set by the organization’s credit risk approving unit, which is independent of the treasury
dealing function.
In judging the credit worthiness of the counterparty SBL uses the credit Studys of
D&B and other authentic sources. Sometimes the rating of the counterparty from the Bankers
almanac is also used.

5.10 Stop Loss Orders

A stop loss limit for a product is generally a certain percentage of the organization’s
prior year profit from that product. For example if an organization’s FX trading revenue for
the year 2002 was USD A, the management/ market risk management unit may decide to
accept a maximum of 10% loss of that during the current year. In that case the stop loss limit
for that organization for 2003 would be A X 10%.
In managing the business within the stop loss limit, treasuries running overnight
positions (within their overnight limits) must leave appropriate overnight watch orders. In
Sonali Bank Ltd. the limit is fifteen percent. So this year whenever the amount of loss reaches
to 15% of the profit of the year 2003, the stop loss order will come. So Sonali Bank is
conservative in the trading. As a representative of third generation bank SBL did not get the
chance to take part in big deals in the previous years. So the amount of the profit is not
significant for the foreign exchange market. Fifteen percent of this profit is very much
insignificant in the market. This conservatism in stop loss order limit prevents SBL to operate
in the foreign exchange market with its full capacity.

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5.11 Factors Considered For Sanctioning Credit
Though off balance sheet activities play a vital role in a bank’s earnings, still income
earned out of lending accounts for major portion of income of it? This lending in other words
advance may raise the standard of success of a bank to the highest possible level and at the
same time can be a sole instrument for liquidation (i.e. premature death of a bank) depending
on how this portfolio is handled. So following factors should be given great emphasis.

Who shall get credit?

It is easier to find out a depositor than finding out a good borrower. Public money in
hands of a bad borrower is never safe and secure. Then the question comes whom to lend? In
a nut shell the answer is the entrepreneur who, for attaining his own pecuniary interest as well
as mental satisfaction together with offering additional services and well-being to the society
at large, undertakes efforts to collect together various types of necessary goods, labor
materials, other wealth etc. and by means of application of his wisdom, foresight, creativity,
devotion and self-confidence, takes initiative to add additional utility and value to the
collected materials and wealth by bringing change and or modification in their form. It is
widely accepted that a good entrepreneur is a good borrower.

How much to lend?

Over financing and under financing is very common phenomenon in credit portfolio;
neither of which is desirable as a sound principal of advance. The highest priority of
consideration is that bank credit must not be extended for speculative purpose and sound
credit policy always finds out actual credit need depending on nature, volume, turnover of
business as well as capability of the prospective borrower, which in turns depends on the test
of good entrepreneurship. The most important aspects for consideration is how much a bank
can lend taking into consideration its liquidity position, loan-SBL fund and commitment
already made.

Why to lend?

The recommending as well as sanctioning authority must ascertain and satisfy himself
that all advance are for productive purpose, genuine business and trade need based and
neither for speculative nor for unproductive purpose. It is primary responsibility of
recommending officer to visualize whether the loan, he is recommending for will generate
cash to desired extent benefit to the bank, to the borrower and to the society at large. Bank

47 | P a g e
cannot afford a loan turning bad to the detriment of institution and the society and for this
purpose, the recommending and sanctioning officer must be acquainted with sound principles
of advance and the ways and means to analyze the risks involved with the proposal processes
and the limit sanctioned.

Where to Finance?

Financial activities of a bank, depends upon portfolio management of its funds through
deposit. Bank’s lending activities may be classified into following broad segments-

 Industries
 Trade and Commerce
 Lease
 Real Estate and Civil Construction Agro-based.

5.12 Loan Documentation

Just like other commercial banks; one of the main functions of Somali bank is to extend
credit facilities of its valued customers. The credit facilities are given against varies types of
securities. These are mainly:

Personal i.e. credit worthiness of the proposed borrower and guarantor.

Moveable i.e. FDR, shanchaypattra goods and commodities balance of deposit
A/C etc.
Immoveable i.e. land building etc.

Before rendering credit facilities bank has to create charge over the securities through a
number of agreements .papers etc. which are called documents.

Section 3 of evidence act- 1872 states, “Document means any expected or described up on
any substance by means of letters, Figures or marks or more than one of those means
intended to be used for the purpose of recording that matter”.

The entire purpose of the document is that reliance can be place up on the truth of the
statement contains in them.
The documents should correctly be taken by the bank in order to crate required charges
on the securities defectively in favor of the bank the proper and correct documentation is
essential from the point of view of the safety of the banks interest.

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Steps of the documentation

For proper and correct documentation a banker has to go through the following steps:

Prepare a list of require document.

Verify the legal capacity of the executor.
Affix properly valued adhesive stamp or type on a duly stamped paper.
Execution
a) In presence of manager
b) In one sitting and with indelible ink
c) Any correction altercation etc. must be authenticated with full signature
d) Correctly dated
e) If several pages execution must put their full signature in all pages
Witness.
Registration.

5.13 Credit Proposal and Sanction Process of SBL

The total process of proposal and sanction is a continuous process. In a particular

stage the describe loan is sanctioned or rejected by the authority. The total process consist
maximum of 6 steps:

Step-1: The client applies for a certain amount of loan in a prescribed form which is available
in the branch office. He has to mention the amount; the purpose, the mortgage property that
he can assure and the time when he wish to enjoy the amount.

Step-2: The branch manager and the cashier then take the responsibility to visit and evaluate
the concern. They have to prepare a credit Study mentioning the present condition, assets and
liabilities ratio, and reputation along with the origin of the concern. He should be some
recommendation about the dependency of the firm.

Step-3: Then the credit Study is forwarded to the original office for approval. In the regional
office two dealing officer under the direct supervision of AGM made some other
recommendations by considering the credit Study and direct investigation. Then they will
justify the net worth of the concern and its economic position. Here if the amount is with the
ability of the regional head (AGM) he can sanction the loan. Otherwise the proposal file will
be forwarded to the principal office. If the dealing officers found something dissatisfied they
can reject the proposal.

Step-4: The head of the corporate branch (DGM) can sanction a certain level of amount
greater than the regional office. Here the file is strictly observed by the dealing officers under
the direct supervision of DGM. He may sanction the mentioned amount or reject for the
logical cause or send to the GM office or Head office for the further consideration.

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Step-5: After reviewing every aspect of the loan proposal the GM can approve the proposal
up to certain level. He may reject or send the file to the managing director for the directors’
approval. Here it may be sanctioned or rejected.

Step-6: After the approval of the proposal in any of the stage region to the board of directors.
Bank send the proposal file along with the necessary papers of the mortgage and to verify the
validity of the ownership of the property for a little dissatisfaction of the solicitor the
proposal may be rejected. Otherwise he will request the bank to disburse the amount.

Procedure of Sanctioning Secured Over-draft (SOD)

 The party should have a current account with the branch.

 In case of a proprietorship firm, trade license must be submitted and in case of
a limited company, all the documents required to open a current A/C should be
submitted. The financial statements of the concerned firm should also be
submitted.
 The party will submit application to the concerned officer in theprescribed
form.
 The officer will prepare a “Credit Appraisal”, where he writes about the
business concern, details of proprietors/ directors of the concern, management
structure, the existing credit facilities, the particulars about the facilities that
asked for – such as margin limit, date of expiry, details of security, and any
other relevant information with a proposal to sent it to the head office, General
advances Division for approval.
 Head office will examine the proposal and if it seems to a viable then the loan
will be sanctioned.

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Process of Opening a Cash-Credit a/c

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52 | P a g e
 Figure 2: Cash Credit Sanctioning process of SBL.

After sanctioning cash credit, the customer is to prepared documents required

charge documents. Thereafter, the banker issues a cheque-book for withdrawing cash
from the account. The customer can withdraw cash from the account the sanctioned
amount.

The charge documents required for opening a CC account are as follows-

 Demand promissory Note (DP note).

 Letter of agreement.
 Revival Letter.
 Letter of continuity.
 Letter of hypothecation/Pledge.
 Letter of Guarantee.
 Memorandum of deposit of Title Deed (in case of CC hypothecation
arrangement).

5.14 Borrower’s Preparation of Loan Proposal

To get Advances or loans from Banks, it is not very easy way to acquire. It demands
some preparation from the Borrower. Because which the amount is sanctioning by the banks
is not of its own. The public deposits this amount, so it is very risky for Bank to lend this to
the Borrower. If the Bank fails to recover that money than it should be paid from its own
fund. As a result, Banks fixed a systematic way to minimize this lending risk and try to
proper use of the money. Proposal requires:
o Loan Application.
o Required Paper as per Ownership of the Industry.
o Schedule of Mortgage Properties and Relevant Papers.
o Market reputation.
o Other Bank opinion about the previous money Lending.
o Feasibility Study.
o Lending Risk Analysis.
o Financial spread sheet analysis.
o Credit scoring.
o Forwarding.

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 o Valuation of Certificate.
o Trade License & CIB Study.
o Commercial Invoice.
o Certificate of Origin.
o Memorandum of Association & Articles or Association.
o No objection Certificate from Local Authority and from Ministry of
Environment.
o C.S, R.S & S/A of Land.
o Mutation Certificate.
o Affidavit and Personal Guarantee.
o General Irrevocable Power of Attorney.

Loan Sanction, Disbursement and Recovery Procedure almost same as General Advances.
Working Capital Management involves the financial and Management of the Current assets
of the Firm/industry. A Firms/industries ability to properly manage Current assets and the
associated liability obligations may be determine how well it is able to survive in the short
run, When a Firm/industry is unable to meet its current assets (payment of labor, raw
materials etc.) then the Firm/Industry to the Bank for Working Capital. After proper
investigation, Bank sanctions Working Capital for that Firm.
Since 1973-74 Sonali Bank Limited started to disburse in Agricultural Credit Program. The
lion share of the disbursed credit goes for crop; the credit is being disbursed in a limited
scale for the income group under various programs.

5.15 Necessary Instrument for Issuing Debt

 DP note unlading stamp.
 Letter of continuity.
 Letter of arrangement.
 Letter of disbursement.
 Letter of hypothecation.
 Statement of monitoring signed by manager.
 Memorandum of deposit title deed.
 Power of attorney in case of failure to repay debt.

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5.16 Credit Administrations of SBL

The board of directors being at the highest level of organization structure plays an
important role on the credit administration. The board of directors is not directly concerned
with the day to day operation of the bank. The board has delegated the authority to the
managing director. The Head Office credit committee and other assigned credit officers
under the guidance of the managing director approve, direct, monitor and review lending
operations throughout the bank and ensure that the credit policies are adhered to and the
credit operation is conducted in an effective way. In order to ensure the effective credit
portfolio, the board, in turn, monitors the credit department and ensures placement of
qualified officials who have got the right aptitude, formal training in finance, risk analysis,
bank credit procedures as well as required experience.

5.17 Loan Documents Check List

The Loan Documentation Check List (LDCL) covers the matter relating to security
documentation in respect of sanctioning and draw-down credit facilities to ensure that
prescribed documentation formalities have been observed and required securities have been
obtained as per sanction terms and conditions to safeguard Bank’s legal protection and to
avoid credit risk in the exposure. The Loan Documentation Check List (LDCL) should be
prepared and duly signed by the concerned person and reviewed by the designated person
and filed as per circular. Moreover, copy should be forwarded to controlling office/head
office for further checking as per requirement of circular. It should also be preserved by the
respective office properly for further audit/review by internal auditor, controlling office,
Bangladesh Bank Inspection Team, etc.

5.18 Loan Recovery Of Sonali Bank Limited

In finance the term recovery refers to collection of amount due. The normally
recovery depends on the purpose, time and condition, business running process etc. Normally
loan amount will be recovered on installment basis. The manager can fix installment period
on the basis of nature of their business.

Security

Some loans and Bank advance are issued to the customers against security. Sonali
bank also grants loans in term of security. Security is a policy that helps the bank to recover
the loan from the borrower, even if the borrower is unable to repay the borrowed loan.

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 Financing loan is the key investment for bank with keeping collateral as security. As
a result bank has to concern when loan is disbursed and consider the security as bank
financial performance based on that. Security creates an obligation on the borrower to make
the payment on time. Sometimes bank wants some tangible security from which he can
obtain repayment in case the borrower is unable to meet his obligations. Without taking such
security the business of money lending would be too speculative.

Security is considered as insurance or a cushion to fall back in case of emergency.

Bankers may realize it and reimburse themselves if the well calculated and almost certain
source of repayment unexpectedly fails. It is, however, incorrect to consider an advance
proposal from the point of view of security. An advance is granted by a good banker on its
own merits, that is to say with due regard to its safety, capacity liquidity purpose etc. and
after looking in to the character, capacity and capital or the borrower and not only because
the security is good. Adequate securities to be obtaining while sanctioning and disbursing
loan and advances stand for the banker as the last resort for recovery in case of loans and
advances being inactive and stuck-up.

Security can be classified as personal as well as primary security.

Personal Security
In all advances the banker has a right if action against the borrower personally. Still
then bank takes demand promissory notes from the borrower. Sometimes the banker in
addition to borrower’s personal security obtains guarantee from a respectable third party as
personal security. These securities may be termed as personal security.

Primary and collateral Security

Primary security is that security which is regarded as the primes cover for an advance
and ordinary is tendered by the borrower himself. The term’s collateral security is applied to
security tendered by the first party or third party to secure as advance.

The common methods of charging security are:

Pledge

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 When goods are bailed as security against advance of performance of a promise then
it is called pledge. Ownership remains with the pledge and profession lies with the pledge
that acquires and special priority and lien so long his loan is not repaid.

Hypothecation

It creates a charge on property or goods for the amount of the debt. The owner retains
his ownership as well as possession. But in case of default bank will be the legal owner of the
goods.

Mortgages

Transfer of an interest in specific immovable property for the purpose of securing the
payment of money advanced or to be advanced by way of loan, existing or future debt, and
the performance which may give rise to a pecuniary liability. Usually there are two types of
mortgage such as registered mortgage & equitable mortgage.

Assignment

An assignment means transfer of right, property or debt or to make it over to another

person. It is same as mortgage with the difference that in mortgage there is always a right of
redemption but in the assignment it is provided by a separate agreement. Assignment relates
to actionable claims. Actionable is a claim to any debt other than a debt secured by mortgage
of immovable property or by Hypothecation or pledge of movable assets.

Lien

Lien is a right to retain goods/ properties belonging to the debtor given to the creditor
as security until he has discharged the debt due. Lien entitles the retainer to only retain the
goods. He cannot sell the goods in the absence of a contract to the contrary.

Set off

Right of set is the right of debtor to the total or partial of a claim of a creditor against
him in his counter claim against the latter. It is the combining of accounts between a debtor &
a creditor so as to arrive at the net balance payable to one or the other. The right of set off
enables a banker to adjust wholly or partly, a debit balance in a customer’s account with any
balance lying at his credit in any other account.

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Guarantee

Guarantees are obtained from third parties to secure advances under different
situations such as in case of clean advances which are subject to credit restrictions. Or in case
of advances to a partnership firm, limited company, advances where collateral security in the
form of real estate/ FDR BSPs are owned by third person etc. Guarantee should never be
accepted from minors and persons of unsound mind, insolvent person who cannot enter in to
a valid contract.

 Insurance:

Insurance is a written and definite contract between two parties under which one
party pays the other party, the insurer, a definite sum of money called premium in
consideration of which the insurer agrees to indemnify the losses, under agreed terms and
conditions. This insurance policy can be a security for the bank in the time for sanctioning
loans.

Loan Recovery Procedure

Sonali Bank’s profitability and sustainability mostly depends on the recovery of its
outstanding amount. Outstanding amount includes both principal and interest because, 80%
of bank’s earnings comes from advances. A poor recovery rate indicates the weak condition
of the banking operation and vice versa.

Recovery procedure is a lengthy one that requires efforts of the bank, society and
legal institutions. It also takes time and money. The main responsibility of bank manager and
advance / loan officer is to recover the outstanding loan in Sonali Bank. The loan recovery
procedure is divided into several steps. They are as follows:

Reminder

Reminder to the client is given through a formal communication channel. A letter is

written and properly signed on the bank’s papers. This letter is issued several times to remind
the honorable loaner to repay his/her outstanding portion.

Demand Notice

Demand notice is issued before one month being due of outstanding loan or
installment. It is sent to the borrower.

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Legal Notice

If the borrower does not repay their respective loans and interest after maturity being
received the demand notice by the bank; then bank sends legal notice under registered with
acknowledgement by post to the borrowers. Before taking any legal action against the
borrower the bank should send lawyer notice to him.

Special Notice

Besides the above two notices, a special notice signed by DC, TNO is sent to the
respective borrower to keep mental pressure on him for repaying the loan.

Field Recovery

Loan officer tries to recover loan through I.O. receipt by visiting the spot and houses
of the borrower.

Case Filing

If all the procedure except legal action of recovering loan becomes failed then
certificate case is filed against the borrower. If the borrower is in the following category then
the case has to be filed with priority:

 Unwilling to repay loan although he is financially solvent.

 Every effort of loan recovery becomes failure.

 Detrimental to the interest of bank loan.

Loan recovery with the help of interest exempting

The loan amount which becomes more than double in principal and interest and
which is not possible to recover with the help of legal actions then this loan can be recovered
by exempting interest. By this the bad loan can be recovered.

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 CHAPTER SIX
DATA ANALYSIS
AND FINDINGS

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61 | P a g e
6.1 Financial Analysis of Credit Performance of Sonali Bank
A financial analyst will thoroughly examine a company's financial statements—the
income statement, balance sheet, and cash flow statement. ... For example, return on assets
(ROA) is a common ratio used to determine how efficient a company is at using its assets and
as a measure of profitability

Loans and Advances of SBL (Inside & Outside Bangladesh)

INSIDE BANGLADESH
Content 2017 2016 2015 2014
Loans 357,949,955,641.00 323,602,739,279.00 285,849,336,391.00 269,073,312,139.00
Cash Credit 30,205,834,652.00 30,656,623,291.00 31,171,186,508.00 37,031,603,404.00

Overdraft 23,152,592,028.00 20,871,282,661.00 18,124,386,910.00 16,872,306,473.00

Portfolio - - - -
Loan on
Investment
Bills 9,795,288,201.00 7,532,422,567.00 10,880,210,761.00 14,285,137,274.00
Purchased and
Discounted

TOTAL 421,103,670,522.00 382,663,067,698.00 346,025,120,570.00 337,262,359,254.00

Table 5: Inside Bangladesh

OUTSIDE BANGLADESH
Content 2017 2016 2015 2014
Loans 66,906,240.00 62,786,292.00 38,070,318.00 127,440,576.00
Cash Credit 3,231,244.00 2,094,533.00 8,193,103.00 -
Overdraft 202,595,319.00 82,365,170.00 107,126,552.00 -
Bills Purchased 1,841,950,618.00 1,727,804,445.00 167,830,324.00 164,633,313.00
and Discounted
TOTAL 2,114,683,421.00 1,875,050,440.00 321,220,297.00 293,073,889.00
[Source: Audit Study of SBL, 2017, 2016 and 2015]

*TOTAL LOANS =Inside+ Outside of Bangladesh.

Table 6: Outside Bangladesh

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Head Wise Loans, Cash Credit and Overdrafts
Content 2017 2016 2015 2014
LOANS:
Inside
Bangladesh
Demand 335,910,770.00 3,184,326,060.00 3.258,929,606.00 3,606,699,760.00
Loan
Small Loan 388,983,239.00 229,661,353.00 210,801,216.00 418,183,459.00

House 583,960,723.00 769,746,090.00 644,454,520.00 685,757,212.00

Building
Loan
(general)
Staff Loan 61,087,913,982.0 57,822,153,673.0 51,484,263,872.0 48,217,872,882.0
0 0 0 0

Special 175,030,282.00 205,336,463.00 439,495,483.00 635,529,829.00

Small Loan
Program
Loans Under 37,568,156,765.0 33,328,235,398.0 33,632,296,575.0 31,176,311,748.0
S.B Ind. 0 0 0 0
Credit
scheme
(project)
Loans under 90,352,639.00 201,048,242.00 89,945,583.00 95,848,329.00
External
Credit
Program
Working 30,876,904,440.0 29,282,244,216.0 26,291,087,503.0 22,238,509,901.0
Capital Ind. 0 0 0 0
(hypo)
Working 2,680,461,836.00 2,318,270,172.00 1,576,573,571.00 2,151,164,905.00
Capital Ind.
(pledge)
Sonali 115,330,087.00 115,207,354.00 40,822,609.00 39,020,985.00
CRedit

Loans Under 13,607,188,844.0 11,118,091,269.0 9,869,763,662.00 8,666,908,085.00

Agro Based 0 0
Ind. Cr.

63 | P a g e
Scheme

Working 9,635,484,434.00 11,695,180,752.0 11,021,388,661.0 10,697,410,017.0

Capital t 0 0 0
Agro Based
Ind. (hypo)
Working 7,605,375,442.00 6,721,067,721.00 6,631,705,352.00 6,283,475,414.00
Capital to
Agro Based
Ind. (Pledge)
Agricultural 44,620,102,386.0 41,809,811,911.0 39,039,795,786.0 34,920,801,471.0
Loan 0 0 0 0

Micro credit 12,181,814,665.0 12,218,417,972.0 11,913,590,607.0 11,352,823,476.0

(SFL 0 0 0 0
Scheme Plus
RSTL
Scheme)
Loan Under 2,307,322,463.00 2,022,337,034.00 2,004,801,193.00 2,039,690,740.00
Imported
Merchandise
LIM
Loan 35,536,818,039.0 28,250,019,196.0 32,288,959,588.0 37,570,510,565.0
Against 0 0 0 0
Trusted
Receipt
Forced Loan 24,565,140,359.0 24,415,834,572.0 24,786,406,620.0 23,953,745,195.0
Again Back 0 0 0 0
To Back
Loan LC
Loan For 136,339.00 136,339.00 136,339.00 87,349,592.00
L/C under
WES
Loan 809,756,646.00 3,484,459,323.00 1,698,171,170.00 1,737,528,293.00
Against
Inland Bills
Current 932,606,463.00 932,606,463.00 932,606,463.00 932,606,462.00
Account
Barter (Debit
Balance)
Bridge Finance 2,808,525,428.00 2,624,494,329.00 3,013,486,845.00 2,807,331,595.00

Small 1,460,416,597.00 1,152,154,430.00 959,176,358.00 781,985,361.00

Business
Loans

64 | P a g e
Lease 94,466,048.00 148,918,247.00 123,452,604.00 117,232,963.00
Finance
Probasi - - 23,369,814.00 -
Kormo
Songshtan
Prokolpo
Consumer - - 9,176,220,264.00 6,229,930,616.00
Loan
Personal 36,176,764,935.0 22,891,647,109.0 - -
Loan 0 0
Term Loan 10,934,082,503.0 9,288,747,494.00 74,205,988.00 83,039,816.00
to Freedom 0
Fighter
Education 24,260,856.00 201,812,743.00 18,525,875.00 27,025,082.00
Loan
Foreign 932,737.00 8,037,930.00 2,068,332.00 2,858,892.00
Education
Program
SME 572,526,826.00 576,526,950.00 711,389,821.00 539,151,260.00
Finance
(term To
Service)
SME 338,909,394.00 280,495,603.00 320,729,603.00 490,375,586.00
Finance
(Term Loan
To Ind.)
SME 18,270,066,278.0 16,305,651,791.0 13,570,714,907.0 11,032,632,649.0
Finance 0 0 0 0
(Working
Capital to
Ind. Ser.
Tre)
Special 64,254,196.00 - - -
Loan-
Advance
Rent
(Interest
Bearing)
Term Loan 1,500,000,000.00 - - -
To Banks
and NBIFs

TOTAL 357,949,955,641. 323,602,739,279. 285,887,406,709. 269,073,312,139.

00 00 00 00

65 | P a g e
LOANS:
Outside
Cash Credit
Bangladesh 3,231,244.00 2,094,533.00 8,193,103.00 1,860,814.00
Demand 40,518,205.00 37,933,852.00 20,886,714.00 18,521,449.00
Loans
TOTAL 30,205,834,652. 30,658,717,824. 31,179,379,618. 37,033,464,218.
CASH
Small Loan -0 -0 -0 0
1,624,496.00
CREDIT 0 0 0 0
OVERDRA
House
F 26,388,035.00 24,852,440.00 17,183,604.00 9,628,212.00
Building
T
Loans
Overdraft In 23,152,592,028. 20,871,282,661. 18,124,386.910. 16,872,306,437.
TOTAL
BD 358,016,861,881.
0 323,665,525,571.
0 285,887,406,709.
0 269,103,086,296.
0
Loan 00
0 00
0 00
0 00
0
Overdraft
STAFF 202,595,319.00 82,365,170.00 107,126,552.00 95,805,605.00
Outside BD
LOANS
TOTAL
House 23,355,187,347. 54,564,148.883.0
57,178,790,056.0 20,953,642,955. 48,750,818,519.0
18,231,513,462. 16,968,112,042.
45,768,424,647.0
OVERDRA
Building 00 00 00 0
F (staff)
Loan 0 0 0 0
T LOANS
Staff Loan 3,909,123,926.00 3,258,004,790.00 2,733,445,353.00 2,449,448,234.00

TOTAL 61,087,913,982.0 57,822,153,673.0 51,484,263,872.0 48,217,872,881.0

STAFF 0 0 0 0
LOAN
CASH
CREDIT: In
Bangladesh
Cash Credit 9,715,514,560.00 14,122,343,775.0 15,028,421,396.0 21,065,055,914.0
general 0 0 0
(hypo)
Cash Credit 15,814,334,860.0 11,876,838,427.0 11,257,148,051.0 10,659,368,662.0
General 0 0 0 0
(Pledge)
Packing 4,675,985,232.00 4,657,441,089.00 4,885,617,061.00 5,307,178,828.00
Cash Credit
TOTAL: 30,205,834,652.0 30,656,623,291.0 31,171,186,508.0 37,031,603,404.0
Inside BD 0 0 0 0
CASH
CREDIT:
Outside
Bangladesh
[Source: Auditors Study of SBL – 2017, 2016 & 2015]

Geographical Area Wise Loans and Advances of SBL

66 | P a g e
 Content No. 2017 2016 2015 2014
of
Bra
nch
es
IN
BANGLAD
ESH
Urban 744 329,001,324,307 301,133,830,929 295,974,516,255 265,069,270,107
.00 .00 .00 .00
Rural 466 93,766,955,990. 83,181,354,746. 50,050,604,315. 72,193,089,147.
00 00 00 00
OUTSIDE
BANGLAD
ESH
Overseas 2 450,073,646.00 22,932,563.00 321,220,297.00 292,073,889.00
TOTAL 1212 423,218,353,943 384,315,185,673 346,346,340.867 337,554,433,143
.00 .00 .00 .00
[Sources: Auditors Study of SBL – 2017 & 2015]

Table 7: Head Wise Loans, Cash Credit and Overdrafts

67 | P a g e
Industry Wise Loans and Advances of SBL
Content 2017 2016 2015 2014
Govt.ofBD Food (Salt 1,435,200,000.00 1,437,677,000.00 1,405,519,000.00 1,405,475,000.00
+Ricc)
Barter Accounts 932,600,000.00 932,600,000.00 932,600,000.00 932,600,000.00

Sugnr mill 20,742,700,000.00 30,705,865,000.00 - 206,800,000.00

Food Procurernent 1,628,100,000.00 587,441,000.00 22,000,000.00 349,400,000.00

Mohinagonj 34,764,200,000.00 23,849,139,000.00 800,000.00 2,894,275,000.00

Govt.food collect
bill
Rural Credit & Agn. Loan 34,804,954,000.00 34,744,446,000.00 34,097,515,000.00 32,211,256,000.0
0
Trading 50,917,180,000.00 52,428,183,000.00 43,995,347,000.00 38,478,E43,000.
00
Forcign Exchange 10,878,181,000.00 13,880,439,000.00 11,365,467,000.00 14,433,769,000.0
(LTR/LIM/PAD/FB 0
PN, etc)
Garments (Force lnan, PCC, 37,349,410,000.00 35,906,581,000.00 34,639,843,000.00 30,454,010,000.0
etc) 0
Textile 33,307,372,000.00 33,841,023,000.00 32,598,100,000.00 36,215,200,000.0
0
Fish Processing 3,694,243,000.00 4,114,873,000.00 4,330,771,000.00 5,038,905,000.00
Cold Storage 3,382,140,000.00 2987,796,000.00 2,327,600,000.00 2,119,898,000.00
House Building (General) 471,894,000.00 326,466.,000.00 408,208,000.00 400,475,000.00

Jute 8,607,175,000.00 8,498,850,000.00 6,953,392,000.00 6,450,517,000.00

Cement 67,367,000.00 138,200,000.00 121,470,000.00 47,555,000.00
Tannery 1,950,577,000.00 690,537,000.00 707,740,000.00 970,145,000.00
Bricks & Tiles 753,430,000.00 831,018,000.00 693,473,000.00 651,0l6,000.00
Engineering 1,189,605,000.00 1,099,561,000.00 929,170,000.00 l90,29l,000.00
Cottage Indusries 141,940,000.00 68,841,000.00 451,318,000.00 585,044,000.00
Food Staff 6,402,890,000.00 3,520,604,000.00 4,992,165,000.00 5,917,671,000.00
Pharma 719,289,000.00 624,982,000.00 750,108,000.00 1,395,015,000.00
(ChemicaVPlastic)
Iron & Steel 7,969,539,000.00 6,351,240,000.00 6,097,865,000.00 5,944,148,000.00
Tobacco & Beverage 2,000,000.00 1,997,000.00 1,961,000.00 178,237,000.00
Paper 3,865,764,000.00 2,885,255,000.00 3,965,171,000.00 3,939,502,000.00
Products/Printing Packaging

Glass & Ceramic 1,971,816,000.00 1,753,378.00.00 2,086,281,000.00 2,775,766,000.00

Aluminum and 135,039,00.00 139,233,00.00 163,281,000.00 167,340,000.00
Other metal

68 | P a g e
Others 155,133,74,94.00 932,600,000 152.308,875,867.0 143,201,280,141.
(ODrBikalpo/Bridge 0 00
FinancingilT,
BPC/BSEC/
BIMC/BCIC/BTMC
/FDC/BSCIC, Overseas
Branches
etc.)

TOTLA 423,218,353,943.0 384,538,118,238.0 346,346,340,867.0 337,554,433,143.

0 0 0 00

[Source: Audit Study of SBL- 2017, 2016 & 2015]

Table 8: Industry Wise Loans and Advances of SBL

Sector Wise Loans and Advances of SBL

Content 2017 2016 2015 2014

Government 5,557,388,000.00 2,957,718,000.00 4,257,312,143.00 2,894,275,000.00
Other Public: 63,926,632,000.00 54,555,004,000.00 52,410,600,000.00 61,203,200,000.00
(Semi Govt.
Autonomous
)
Private 353,284,260,297.0 326,802,463,675.0 289,357,206,857.0 273,164,900,000.0
0 0 0 0
Overseas 450.073,646.00 222,932,563.00 321,221,861.000 292,058,143.00
Branches
TOTAL 423,218,353,943.0 384,538,118,238.0 346,025,119,000.0 337,554,433,143.0
0 0 0 0
[Source: Audit Study of SBL 2015-2017]

Table 9: Sector Wise Loans and Advances of SBL

69 | P a g e
100%

90%

80%

70%

60% Overseas
Private
50%
Semi Govt.
40% Govt.

30%

20%

10%

0%
2017 2016 2015 2014

Fig 3: Sector Wise Loans and Advances of SBL

70 | P a g e
Classification of Loans and Advances as Per Bangladesh
Bank Circular in Percentage
Content % of Total Loan Amount
2017 2016 2015 2014
Unclassified
Standard 62.64% 64.05% 68.84% 72.05%
including staff
loan
Special 1.98% 7.52% 5.99% 2.26%
Mention
Account (SMA)
SUB TOTAL 64.62% 71.57% 74.83% 74.31%
(A)
Classified
Sub- standard 2.32% 3.53% 2.59% 1.79%

Doubtful 1.74% 2.06% 1.32% 3.37%

Bad/Loss 31.22% 22.79% 21.17% 20.46%

SUB TOTAL 35.28% 28.38% 25.08% 25.61%

(B)
Overseas 0.11% 0.06% 0.09% 0.09%
Branches
TOTAL 100% 100% 100% 100%
(A+B+Overseas)
[Source: Annual Study of SBL (2014-2017)]

Table 10: Bank Circular in Percentage

71 | P a g e
120.00%

100.00%

80.00%

60.00% Overseases
Classified
40.00%
Unclassified
20.00%

0.00%
2017
2016
2015
2014

Fig 4: classification of Loans in percentage

72 | P a g e
Announced interest rate chart of SBL (lending rate)
(Percentage per annum) of 2017
Content Percentage
Sub-category Sc-2
Agriculture 4.00-9.00
Term Loan to large & medium scale 11.00
industry
Term Loan to small Industry 11.00
Working Capital to Large & Medium 11.00
Industry Scale Industry
Small Industry 11.00
Export 7.00
Trade financing 11.00

Housing loan 9.00

Consumer credit 13.00
Credit card 14.00
Credit to NBFIs 12.50
Others 0.00

Table 11: Announced interest rate chart of SBL

6.2 Questionnaire Analysis

73 | P a g e
During my internship period in Janata Bank, I asked a number of customers regarding the
credit management of the bank. The interpretation of the data (at a glance) is given below:
Subject of asking questions:
01. Convenient Branch location
02 Trust-worthy banker-customer relation
03 Faster solution of credit complain
04 You are comfortable and free enough in this department
05 Maintain strong privacy in credit information.
06 Provide an overall good service quality
07 Easy and quick disposal of loan
08 Provides prompt desk service
09 Terms and conditions are clear to customers
10 Cordial reply to credit queries

Q1. Convenient Branch location

Convenient to branch location

Strongly disagree Disagree Neutral Agree Strongly agree

18 % 7%
15 %

0%

60 %

Fig 5: Convenient Branch location

Interpretation
Location is important for bank. The total numbers of respondents are 30. When we
asked the question, how much convenient the location of the Kotbari branch to the
customers and employee both, we got a positive reply. From the above analysis, it is
observed that a greater percentage of the respondents were agreed to the statement that is

74 | P a g e
60%. Where 18% respondents were strongly agreed, 7% respondents were strongly
disagreed and 15% respondents were opposed with this statement.

Remarks

From the graph, we can say that most of the customers and the employees of
SBL are able to get the location advantages from the bank.

Q2. Trust-worthy banker-customer relation

Trust-worthy banker customer

relation
Series1

Strongly agree 10

Agree 63

Neutral 11

Disagree 9

Strongly disagree 7

Figure 6: Trust-worthy banker-customer relation

Interpretation

There must be trust worthy banker-customer relation for the smooth running of
banking activities. My observation is that there is a friendly relation between bankers and
customers. The employees and customers were clearly answered agreed with the statement.
About 63% respondents are agreed that there is a trust-worthy relation between the banker
and customer. 9% disagreed with tis statement. 11% of the respondents are confused with
the statement because of the complex behavior of some customers.

Remarks

From the graph, we can say that most of the customers and employees of SBL
maintain a trust-worthy relationship.

75 | P a g e
Q3. Faster solution of credit complains

Faster solution to credit complains

Strongly disagree Disagree Neutral Agree Strongly agree

5% 0%

30%

50%
15%

Figure 7: Faster solution of credit complains

Interpretation
For better relation with customers it is necessary to provide the faster solution of the
credit complain. About 50% of the respondents were strongly agreed with the above
statement. 5% respondents were disagreed, 15% remained neutral, and 30% were disagreed
with the statement. So it can be said that credit complains are cordially taken and are solved
with diligent concern.

Remarks

From the graph, we can say that most of the employees of SBL give the
feedback of the faster credit complain.

76 | P a g e
Q4. You are comfortable and free enough to give opinion in decision
making in this branch.

Feel free to give opinion

Series1

65

12 15 8
0
Strongly Disagree Neutral Agree Strongly
disagree agree

Figure 8: Feel free to give opinion

Interpretation
Decision making is vital for smooth running of daily activities. If there is a
participative decision making method, the employees feel that they are given priority and
are motivated. From the above observation we can say that 65% of the respondents are feel
free to give their opinion in decision making, 12% are opposed with this statement, and
15% became neutral.

Remarks

From the graph, we can say that most of the employees of SBL feel free to
give their opinion in decision making of the bank.

77 | P a g e
Q5. Maintain strong privacy in credit information

Strong privacy in credit information

Strongly disagree Disagree Neutral Agree Strongly agree

5%
20% 10% 5%

60%

Figure 9: Strong privacy in credit information

Interpretation
The total numbers of respondents are 30. We asked this questions to the customers
and the employees of the Sonali bank Ltd. From the above analysis, it is observed that a
greater percentage of the respondents were strongly agreed to the statement that is 60%.
Where 20% respondents were agreed, 10% respondents remained neutral, 5% respondents
were disagreed and 5% respondents were opposed with this statement.

Remarks
From the graph, we can say that SBL maintains a strong privacy in giving the
credit information of the customers to others.

78 | P a g e
Q6. Provides an overall good service quality

Overall good service quality

Strongly disagree Disagree Neutral Agree Strongly agree

5% 10%
5%

57% 23%

Figure 10: Overall good service quality

Interpretation

The total numbers of respondents are 30. We asked this questions to the customers of
the Sonali bank Ltd. From the above analysis, it is observed that a greater percentage of the
respondents were strongly agreed to the statement that is 57%. Where 23% respondents
were agreed, 5% respondents remained neutral, 10% respondents were disagreed and 5%
respondents were opposed with this statement.

Remarks

From the graph, we can say that most of the customers of SBL are satisfied with the
overall service quality of the bank.

79 | P a g e
Q7. Easy and quick disposal of loan

Easy and quick disposal of loan

70

60
60
50

40

30 Series1
20

10 15 15
5 5
0
Strongly Disagree Neutral Agree Strongly
disagree agree

Figure 11: Easy and quick disposal of loan

Interpretation
Every bank tries to dispose the loan in a short period of time. The employees and
customers of Sonali bank limited of Kotbari branch are not always clear about the disposal
of loan. About 60% respondents said that there is a process to dispose loan and to complete
the process it takes time and that’s why quick disposal of loan is very difficult. From the
above analysis, it is observed that a greater percentage of the respondents were strongly
disagreed to the statement that is 60%. Where 15% respondents were agreed, 15%
respondents remained neutral, 15% respondents were agreed and 5% respondents were
strongly agreed with this statement.

Remarks
From the graph, we can say that most of the customers and employees of SBL are not
agreed that SBL provide easy and quick disposal of loan.

80 | P a g e
Q8. Provides prompt desk service

Promt desk service

Strongly disagree Disagree Neutral Agree Strongly agree

4% 6%
10%
10%

70%

Figure 12: Promt desk service

Interpretation

All the employees of Sonali Bank Limited are very much sincere and co-operative
and provide prompt desk services. It has been focused clearly from the survey. About 70%
employees and customers were agreed with the statement as they provide the desk service
promptly. Where 10% respondents were strongly agreed, 10% respondents remained
neutral, 6% respondents were disagreed and 4% respondents were strongly disagreed with
this statement.

Remarks

From the graph, we can say that most of the customers of SBL are satisfied with the
desk service of the employee of the bank.

81 | P a g e
 Q9. Terms and conditions are clear to customers

Clear tearms and conditions of loan

Strongly disagree Disagree Neutral Agree Strongly agree

0%
0%
10% 0%

90%

Figure 13: Clear tearms and conditions of loan

Interpretation
There are some terms and conditions of loan. Every bank shows it to the customers.
The employees of Sonali Bank Limited of Kotbari branch also knows the fact and 90%
employees are clear about the clearness of the terms and condition of loan they also make the
customer clear about the terms and conditions of loan.

Remarks

From the graph, we can say that most of the customers of SBL are known to the terms
and conditions of loan.

82 | P a g e
Q10. Cordial reply to credit queries

Cordial Reply to credit queries

Strongly disagree Disagree Neutral Agree Strongly agree

18% 7%

3% 12%

60%

Figure 14: Cordial Reply to credit queries

Interpretation

The total numbers of respondents are 30. We asked this questions to the customers of
the Sonali bank Ltd. From the above analysis, it is observed that a greater percentage of the
respondents were agreed to the statement that is 60%. Where 18% respondents were
strongly agreed, 12% respondents remained neutral, 7% respondents were disagreed and
3% respondents were opposed with this statement. As employees are very much friendly
they give the cordial reply to the credit queries. From the survey it is found that the
customers of SBL think that about 60% employees provide cordial reply to credit queries to
the customers.

Remarks

From the graph, we can say that most of the customers of SBL are able to get cordial
reply from the employees about the credit queries.

83 | P a g e
6.3 Findings

Customer satisfaction level is quite good. Informal conversation with some customers
reveals that they approve the credit evaluation and management process of Sonali
Bank Ltd.
Governments orders like account opening for 10 taka, etc. increases cost. SME loans
for farmers without collateral not only increases credit risk but also costly for banks
But return on these services are low.
The credit sanction and disbursement procedure is quite lengthy.
Filing procedure is not maintained in a definite and clear manner. It is difficult to
locate the documents in a chronological and sequential manner. A definite practice,
though mentioned in the credit policy is not always maintained by the credit officials.
The standard loan and advances of Sonali Bank is increasing year by year. And it
carries positive sign for Sonali Bank. It also induces trust ability among its
stakeholders.
The interest income from loan and advances of Sonali Bank limited is increasing year
by year. This means the bank’s net profit will increase further and it can expand more
widely.
Total Deposit is increasing which represent the positive sign for the bank as deposits
are increasing than the bank can use more proportion of deposit for loans and
advances.
Before granting loans the bank officials clarify the borrower’s information, his/her
financial position, securities against loans & advances and make analysis on his/her
business and so on.
Customer satisfaction level is quite good. Informal conversation with some customers
reveals that they approve the credit evaluation and management process of Sonali
Bank Ltd.
Systematic and timely monitoring and appropriate documentation are tried to be
maintained.
Sonali Bank Limited undertakes continuous monitoring, inspection, periodical review
of project implementation schedule, early alert system etc. to recover loan on
schedule.

84 | P a g e
Sonali Bank Limited has been maintaining its position in extending credit to
government bodies, sector corporations and private enterprises with a view to
implementing government policies.
The loan portfolio of the bank spreads among small and medium enterprises, general
business and industries.
From the Analysis of financial statement of SBL from 2014-17, Sonali banks
performance for Loans and Advances in the private sector is very high; comparing to
Government, Semi government and Overseas branches.
Higher rate of interest plays a great role in Loan and Advance Management.
Sometimes the rate is so high that the return from the investment is not so adequate
enough to repay the loan. And hence default occurs.
Influence of political leader is an everlasting problem. That’s why door of corruption
is broadly opening day by day.
The credit sanction and disbursement procedure is quite lengthy.
Sonali Bank Limited should require introducing improved information systems within
bank as well as among the borrowers for developing a reliable Loan and Advance
Management system.

85 | P a g e
 CHAPTER SEVEN
PROBLEM,
RECOMENATION
AND CONCLUSION

86 | P a g e
7.1 Problems

Proper Credit Management is the most important function of any Bank. But the credit
management activities of SBL suffer from some kinds of problems that are learnt from
discussion with officers, clients and also problems identified from the job observations.

The problems are as follows:

 Discussion with officers of the Head Office revealed that if the Bank collects more
deposit, it would be able to advance credit to more viable projects.
 A culture has been developed among the common people that Bank loans need not to
be repaid.
 Existing bad legal system is another greatest blow and curse to the credit management
system and alarming factor recovering loan from defaulter. In reality it is very
difficult, lengthy and expensive to have a verdict in favor of the Bank.
 Lengthy process of loan sanction or delay is a common problem of credit
management.
 Bangladesh Bank credit risk management policies requires bank to set lending
guidelines which SBL does and reviews on annual basis. As per BB requirement it is
set by top management.
 Due to changes in the export, import, foreign exchange policy as well as monetary
and fiscal long term financing suffer a lot.
 Usually Banks are responsible to provide loan to those who are eligible for the loan.
But in reality, small investors do not get the loan easily. They have to fulfill more
terms and conditions than those who have greater influence in the business
community.
 The banks in Bangladesh has faces a lot of illegal pressure from Political persons,
Directors and Management of the Bank for approval of loan. In that cases risk
managers are bound to approve the loan without any assessment and rationality.
 The risk management has often insufficient time for credit risk management. Huge
workload and hurries for loan approval prevent them from through assessment. So, it
is very troublesome to manage the risk in a prudent manner for the risk managers.
 Training of the risk managers is extremely essential for better risk management. Most
of the banks have not any regular training program. Lacks of proper training on credit
risk management risk managers often dose the mistakes on credit risk management.
 Credit quality depends on close follow –up and monitoring of loans. The follow-up
and monitoring of loans is not strong here. As a result Special Mention Accounts and
deteriorating credit are increasing day by day.

7.2 Recommendations

Sonali Bank should strictly follow the Bangladesh Bank guideline for credit deposit
ratio as its credit deposit ratio was quite higher than Bangladesh Bank guideline.
Make sure the stability of the loan collection.

87 | P a g e
 The credit sanction procedure should be made quicker since competition is very hard
in today's business world. People do not want to wait for three to four weeks on an
average to get a loan which is even protected by security.
Decision making process can be made more decentralized.
In the credit department, strict supervision is necessary to avoid loan defaulters. Bank
official should do regular visit to the projects.
Credit officers must be skilled enough to understand the manipulated and distorted
financial statements.
Central monitoring system should be more active to maintain classified loan to a
minimum level.
Sonali Bank should maintain a written guideline for Loan and Advance Management.
If all documents are available than it will help to analyze their client.
Filing is a very important component of proper documentation. It has to be dealt with
importance.
Vaults security should be increased.
Every branch should have High tec security system.
An uninterrupted network system has to be ensured. It will save the officials from
much hassle and will save time.
The Information of official web page should keep up to date with more efficiency.
Politically influenced Lending or project finance should be checked.
Gear up persuasion right from initial stage of its default/non-payment of installments.
Legal actions must be taken in time.
Update the Banking system with green banking.

7.3 Conclusion
I have focused and analyzed on Loan and Advance Management in Sonali Bank
Limited. The banking sector in any country plays an important role in economic activities.
Bangladesh is no exception of that as its financial development and economic development
are closely related. That is why the private commercial banks are playing significant role in
this regard.
This Study focused and analyzed on Loan and Advance Management in SBL. In the past
decade there has been a revolution in the communication media through the introduction of
internet and other forms of secure dial-up media. This had an immense impact on all the

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sectors of the industry specially the banking sector. Traditionally in order to execute banking
transaction a customer would require coming at the bank.

Sonali Bank Ltd. is much different in any terms. Its activities are vast and in cases
unique to any other bank. Its deposits and loans are huge compared to other banks. It finances
government projects, provides unique services to people in need, even in places it works as
central bank. This Bank often makes decision for the welfare of general public despite risk of
credit exposure.

Today is not like yesterday and tomorrow will be different from today. Given the fast
changing, dynamic global economy and the increasing pressure of globalization,
liberalization, consolidation and disintermediation, it is essential that Sonali Bank limited has
a robust Loan and Advance Management policies and procedures that are sensitive to these
changes.

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REFERENCES

Books
Dr. Khan A.R.(2012) ―Bank Management‖, 2nd edition, Publication place: Dhaka , Ruby
Publication,

Shekhar. K.C. (1999) Banking theory and practice, 4th edition, Vikas Publication House Pvt.
Ltd., New Delhi, India.

Journals

Bekhet, H.A and Eletter, SH.F. (2014), Credit risk assessment model for Jordanian
commercial banks: Neural scoring approach

Basel Committee on Banking Supervision, Principles for the Management of Credit Risk,
September 2000.

D Stojanovic, MD Vaughan, TJ Yeager - Journal of Banking & Finance, 2008.

Eveline, N. (2010), Credit Risk Management in Banks as Participants in Financial Markets

F Ahmad, S Tahir, B Aziz - … Research Journal of Social Science & Management, 2014

M Rahman - Financial Engineering eJournal, 2019

P Roy - 2019 - dspace.daffodilvarsity.edu.bd

T Davidson, WG Simpson - Journal of Entrepreneurial Finance, 2016

Website

www.wikipedia.org/wiki/creditmanager
http://www.assignmentpoint.com/business/internship-Study-oncredit-risk- management-
of-sonali-bank.html ( Accessed Date: 22th April,2019)
http://www.academia.edu/9842363/Credit_risk_Management_of_Sonali_Bank_BD_Gias_Ud
din_and_Daloar_Comilla_University ( Accessed Date: 25th April,2019)
https://www.sonalibank.com.bd/PDF_file/noc/ICC_POLICY-
https://www.bb.org.bd/econdata/intrate.php

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 Appendices

Questionnaire on
Evaluation of Loan and Advance Management of Sonali Bank limited
(Only for Internship Study Purpose)

Dear sir/madam,
I am very happy to have you and informing that I am going to make an internship Study on
“The evaluation of Loan and Advance Management of Sonali Bank limited as a part of MBA
program. Kindly notice that this is an academic study and findings will remain confined
within academic interests. No part of this study will be disclosed. Your kind operation will be
highly appreciated.
Read the questions carefully and consider that your chosen number corresponds with your
own opinion. The question corresponds are: (1= Strongly Disagree; 2= Disagree; 3= Neutral;
4= Agree; 5= Strongly Agree).

Personal Information
Please till in the box classifies you best
1. Branch Name :
2. Name :
1. Gender : Male Female
2. Age : 20-30 30-40 40-50 50-60
4. Education : SSC HSC Honors M Master’s
Degree.

[Please show the extent to which you feel]

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 SL. Statements Strongly Disagree Neutral Agree Strongly
NO. disagree agree

(1) (2) (3) (4) (5)

01. Convenient Branch location
02 Trust-worthy banker-customer
relation
03 Faster solution of credit complain
04 You are comfortable and free enough
in this department
05 Maintain strong privacy in credit
information.
06 Provide an overall good service
quality
07 Easy and quick disposal of loan
08 Provides prompt desk service
09 Terms and conditions are clear to
customers
10 Cordial reply to credit queries

If any opinion, please comment:

……………………………………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………………….

Thank you for cordial co-operation.

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