Md.

Safayet Hossain
DGM & Senior Faculty
RBTA
Loan
Advance
Credit
Lending
Borrowing
Debt
Financing
Financial facility
Funding
Financial support
 Loan and Advance:80%
 Other Investment:20%
 Term Loan
 Demand Loan  Money Market:
 Treasury Bill/Bond
 Current loan
 Bangladesh Bank bond/Bill
 Short term Agri and Micro
 Repo/Reverse Repo
Credit
 Call Money
 Commercial Paper

 Capital Market:
 Securities: Share/Stock
 Bond Market:
 Bond/Subordinated Bond
 Debenture

Forex Market:
 Financial Derivatives: SWAP, Options,
Forwards, Futures
 Features of Loan
a) Disburse at one time or on Phases
b) Repayable on installment or on/before expiry
c) No further drawing Facilities are Allowed
d) Become Classified if installment become overdue for a
certain time
e) Usually termed as Term Loan and no renewal facility are
allowed.
g) There may be a grace period for repayment
(h) Awarded to both business and non-business purpose
i) Any person, institution or agency can give this loan
Example of Loans: Construction Loan, Car Loan,
Project establishment Loan
 Features of Advance
a) Allowed a fixed Limit of amount.
b) Period of facility allowed not more than one year
c) Repayable on quarterly basis or on/before expiry
d) Frequent number of transactions are allowed as per customer’s
need
e) Become Classified if become overdue for a certain time
f) Usually termed as current loan and facilities are renewable
g) There is no any grace period for repayment
h) Awarded only for business purpose
i) Only Bank can give this loan
Example of Advance:
Cash Credit (Pledge/hypo), Overdraft, SME Working Capital,
Revolving Credit(PC), etc
1. Cost of Deposit: Average Rate of Cost paid by the bank to the depositors
against their deposit of varied types.
2. Cost of Borroring: Average rate interest realized by the bank from the
borrowers against their varied types of credit
3. Spread: Gap between cast of borrowing and cost of deposit
4. Cost of Fund= Cost of Deposit+ Operating Cost + Cost of Provision
5. Margin: Gap between Cost of borrowing and Cost of Fund
6. Bank Rate: The rate at which BB lend to or disciount bill of it’s scheduled
bank.
7. Grace/Moratorium/IDCP: Period at which lenders are given fecillty to
suspend his payment .
8. Single Borrower Esposure Limit/Syndicate Financing/Consortium
9. Amortization/EMI/Reducing Balance/Balloning
10. Rescheduling/Restructuring/Write off/ Interest Waiving or Remission
11. Classification/Declassification and Deafault
12. Whistleblower/EWS
 Based on disbursement:
 Funded loan:
 Term Loan
 Demand Loan
 Working Capital Loan
 Non-funded Loan:
 Bank Guarantee,
 Letter of Credit
 On the basis of Security:
 Secured Loan: The loan which is backed by securities is Secured Loan.
Unsecured Loan: The loan on which no asset is pledged as security is
Unsecured Loan.
Non-secured Loan: Partially Secured Loan
 On the basis of Repayment:
 Current Loan: The loan which is repaid through several
transactions within or before expiry without maintaining any
repayment schedule but at client’s opportune time.
 Demand Loan: The loan which is repaid on demand of the
lender is Demand Loan.
 Time Loan: Loan, which is repaid in full at a future specified
date is Time Loan.
 Installment Loan: Loans which are to be repaid in evenly
distributed monthly installments is Installment Loan.
 Based on Transaction-
 Open ended: Working capital or Cash credit or OD
 Closed ended : Term loan or Installment loan
 On the basis of Purpose:
 Home Loan
 Car Loan
 Education Loan/Student Loan
 Commercial Loan/Trading Loan
 Agricultural Loan
 Rural Credit
 Micro Credit
 SME loan/Entrepreneurship Loan
 Agricultural Credit
 Industrial Loan/Project Loan
 Personal/Consumer Loan
 Professional Loan
 BMRE loan
 On the Basis of Utilization:
 Working Capital loan : Current Loan
 Business/Project Establishment and Development Loan: Term Loan, BMRE Loan
 Foreign Trading: Export/Import Loan
 Personal Loan: Consumer Loan

 On the basis of Risk Coverage:

 Single Bank Financing:
 Club/Joint Financing:
 Syndicate Financing
 Consortium Financing
 On the basis of BRPD Circular no. 14/2012:
 Continuous Loan
 Term Loan
 Demand Loan
 Short Term Agricultural and rural Credit
1. General Loans(for non-business Purpose).
2. Cash Credit
3. Overdraft (OD)
4. SME Financing: Working Capital Loan, Term Loan
5. Industrial /Project Financing: Working Capital
Loan, Term Loan, BMRE
6. Foreign Trade Financing: Import Loan, Export
Loan
7. Short term agricultural and Micro credit.
 Loan

1. Project Loan 2. HBL 3. Consumer Credit 4. Other terms Loans

* HBL- House Building loan.

Features of Loan:
1. This type of loans is disbursed at a time.
2. Frequent transaction can not be made in this type of loan.
3. It is generally of a facility of more than one year.
4. It has a maturity date and a repayment schedule.
5. Interest and principal in the form of installment at monthly/quarterly
realized.
6. The loan must be realized within maturity/expiry date etc.
 Cash Credit

A. CC (Hypo) B. CC (Pledge)
A. Cash Credit (Hypo):
It is a short term funded facilities extended with collateral securities.

Features:
 Facility allowed against Primary security backed by collateral.
 Generally extend to traders for one year and renewable .
 It has a credit limit and transaction can be occurred up to credit limit
 Interest is charged on daily debit balance at quarterly rest etc.

B. Cash Credit (Pledge):

It is a short term funded facilities extended against commodity pledged.
Features :
 Facility allowed against Primary security/commodity.
 Generally extend to traders for one year and renewable .
 Interest is charged on daily debit balance at quarterly rest.
 Drawing Power (DP) is allowed against the value of pledge goods.
 The commodity pledged is kept in godown under bank controlled etc.
OD means an extension of credit from a lending institution when an account balance reaches zero.
OD allows the individual to continue withdrawing money even if the account have no fund in it. .

Overdraft

A. Secured overdraft B. Clean Overdraft

General Features:
•The overdraft limit sanctioned is predefined by the bank depending upon the securities
pledged or repayment capacity of the Account holder.
•The drawing limit is specified by the bank, or financial institution may vary from bank
to bank and borrower to borrower.
•Interest is charged on the amount utilised not on the limit sanctioned.
•The amount withdrawn above the specified limit will be subject to additional charges.
A. Secured overdraft (SOD):
Secured overdraft is sanctioned by the bank against financial
obligation and scheme account of the banks such as ;
1. FDR
2. RMSS
3. RDBS
4. RDPS
5. RMDS
6. Other financial obligations and scheme accounts

B. Clean overdrafts:
Clean overdraft is without any security. As it has no security, it is called clean. It
is not in practice now .

Features:
1. Advance is allowed up to 90% of the face value of the financial
obligations/schemes.
2. The balances or value of the financial obligations/schemes is kept under
bank lien.
3. Transactions can be allowed as CC (Hypo). And so on.
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•Pre-export- Export CC, PC, BTB LC
•Post-export: Bill Purchase, Discount

•Pre-shipment-Letter of Credit
•Post-shipment:PAD, LIM, LTR
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 What is Security:
 Security means thing deposited as a guarantee of an
undertaking or loan to be forfeited in case of
default.
 Why Security:
 To Secure Investment
 To Pressurerise debtors of Recovery
 To reduce cost against provision
 To lower capital requirement
 To make evidence in case of legal steps
 To comply with credit policy
 To minimize credit risk of default
 1. Intangible or Support Security:
 A) Personal Security: Guarantees given by partners, directors
or promoters, third party etc.
 B) Corporate Security: Corporate Guarantee from the Company
 2. Tangible Security: Something that can be realized from the sale or
transfer, e,g: land, building, apartment/flat, plant/machinery, Furniture
and Fixtures, car/motor vehicles, stock of materials, investments, FDR,
stock/Share/Securities/ICB unit certificates, Bond, Insurance Policy etc.
Where debt is not fully realized from the sale of the tangible security, the
bank has usually a right of action in law to recover the balance from the
borrower’s other assets.
 Tangible Security may be of two types:
 A. Primary Security
 B. Secondary or Collateral Security
A) Primary Security: Whenever a loan is sanctioned some goods or
assets are purchased with the help of the bank funds. These are called
primary securities.
 Primary Security is that which is regarded as the main cover for an
advance and is deposited by the borrower himself
 Principal or direct security against which loan is sanctioned
 The bank gets their charge noted over this security in the form of
pledge/hypothecation/mortgage.
B) Collateral Security: The term collateral security is applied to tangible
security deposited by borrower himself or a third party to secure a customer’s
borrowing. This is correct sense in which bankers ordinarily understand the term
collateral security. A collateral security is an additional, secondary, or subsidiary
security provided by the borrower. When primary security remains under the
custody of borrowers, banker, to secure its position, ask the borrower to provide
additional security. Mortgage of land and buildings, machinery, etc are collateral
security.
Type of Loan Security Obtain
CC(Hypo) Margin Stock+ Collateral
CC(Pledge) DP Stock(and or Collateral)

Lease Finance Land, Property or Machinery

HBL Land and Building
Overdraft(OD) Bill/Work order
SOD Balance of deposit
account/Financial
Obligations(FDR etc)
LTR Trust Receipt
Bank Guarantee Margin Personal Guarantee/Counter Guarantee
+ Collateral
 What is Charge:
 Charge means right of out of
certain property. In a charge there
is no transfer of interest or
property. It is a right over some
tangible asset of the borrower.
 (i) Fixed Charge
(ii) Floating Charge
(iii) Pari Passu Charge
(iv) Second Charge/Multiple charge
 The method used depends upon;
 Type of property to be charged,
 Nature of the advance &
 Degree of control over the debtor’s property required
by the banker.
 1. Fixed Charge: A charge is said to be fixed if it is made specially to cover
definite and ascertained assets of a permanent nature or asset capable of
being ascertained and defined. For example: charge on land, building,
heavy machinery etc.
 2. Floating Charge: It is a charge on property which is constantly
changing, e.g. Stock or Share
 3. Pari-passu charge: The term is usually used in case of syndicate finance. In
case of such lending a number of banks or financial institutions join together to
lend a single borrower in an agreed ratio against some common securities. The
securities are charged to all the banker/financial institutions without any
reference like first charge or second charge etc. In this case the lenders are
entitled to have equal rights over the assets as per the agreed share.
 4. Second Charge: A second mortgage is a type of subordinate mortgage made
while an original mortgage is still in effect. In the event of default, the original
mortgage would receive all proceeds from the liquidation of the property until it
is all paid off. Since the second mortgage would receive repayments only when
the first mortgage has been paid off, the interest rate charged for the second
mortgage tends to be higher and the amount borrowed will be lower than that of
the first mortgage.
1. Lien
2. Pledge
3. Hypothecation
4. Mortgage
5. Assignment
6. Set off
 Credit management is the process of granting credit,
setting the terms it's granted on, recovering this credit
when it's due, and ensuring compliance with bank’s
credit policy, among other credit related functions.
 The goal within a bank or company in controlling credit
is to improve revenues and profit by facilitating sales and
reducing financial risks.
 A good credit management system minimizes the
amount of capital tied up with debtors.
 Increasing Profit
 Ensuring adequate cash-flow through efficeient
recovery
 Removing bad debt from the ledger by both keeping
it regular , ensuring realization of instalments,
writing off bad debt..
 Monitoring the Accounts Receivable portfolio for
trends and warning signs(Early warning system).
 Setting credit limits.
 Setting credit terms.
 Setting credit rating criteria.
 Setting and ensuring compliance with a
corporate credit policy.
 Pursuing legal remedies for non-payers.
 Initiating legal or other recovery actions against
customers who are delinquent.

Selection of Borrower Credit Appraisal
Preparing and Processing of Proposal

Advising Approval Letter Sanction/Approval

Letter of Acceptance Documentation Disbursement

Failure Repayment Monitoring & Supervision

Classified Defaulted/NPL Recovery (Legal/Non

Legal Mesures)
 Pre- sanction stage: Collections of information, Analysis of information,
Credit Analysis
 Sanction stage: Formalities observed for sanction
 Post sanction stage: Advising the approval to the client and corresponding
of documentation affairs if necessary.
 Documentation stage: Execution of all charge and legal documentations
with proper stamping.
 Pre-disbursement Stage: Ensuring the correctness of documentation and
observance of stipulated terms and conditions.
 Disbursement stage: Creating Client’s corresponding Loan account (for
new loan) and effecting transaction with crediting loan to client’s account.
 Post disbursement stage:
 Proper follow-up, supervision and monitoring of the utilization of loan
and repayment of interest/principal/installments.
 Proper treatment in case of any difficulty in repayment.
 Preventing default
 Ensuring recovery either by strong persuasion or adopting legal
measures.
The execution of documents in proper form and according
to the requirement of law is known as “Documentation”.
If the bank failed to get documents properly , advance will
not get legal protection.

46
 Steps of Recovery of CL:
 1. Non-legal Measures
 Legal Measures
 Non-Legal Measures:
 Dialogue or Discussion with customers
 Frequent Reminder
 Frequent Visit to borrower
 Recovery camp
 Renewal
 Rescheduling
 Interest waiver Rehabilitation
 Write-off

 Legal Measures:
 Artha Rin Adalot Ain
 PDR Act
 NI Act
THANK YOU ALL
FOR PATIENT HEARING