“Evaluating Credit Management Performance’’

A Case study onSoutheast Bank Ltd, CDA Avenue Branch, Chittagong .

This report is submitted for the partial fulfillment of the Degree of Bachelor of Business
Administration BBA with major in Finance & Banking

SUPERVISED BY
Afzal Ahmad
Associate Profesor Of Accountimg
Department of Business Administration
International Islamic University
Supervisor Signature

------------------------------

PREPARED BY
Mohammad Maruf
ID No: B113119
Program: BBA
Semester: Autumn 2015

Department of Business Administration

Faculty of Business Studies
International Islamic University Chittagong

Internship Duration: March 01 to April 30, 2016

Date of Submission, June, 2016

1
 Letter of submission

June, 2016

To
The Internship Committee
Department of Business Administration
International Islamic University Chittagong.
Chittagong,

Sub: Submission of Internship Report

Dear Sir,
It is a great pleasure for me to submit the Internship Report, which is a requirement for the B.B.A
program.This internship program has given me the experience of working in a corporate environment
and job training which has definitely enriched my knowledge. During the two months internship
period, I am assigned to submit the report under the above topic. This assignment gives me the
opportunity to apply my theoretical knowledge throughout the period, which would be great help for
me in future.
Your acceptance and appreciation would surely inspire me. I would always be available and ready to
explain further any type of contexts of report whenever asked.

Yours sincerely,

-------------------------------------------------------------------

Mohammad Maruf
ID No: B113119
Program: BBA
Semester: Autumn 2015
International Islamic University Chittagong

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 PREFACE

Knowledge is not perfect unless it is put in combine of theory and practice. Only the theoretical
knowledge is not enough to build carrier in real life situation. Practical knowledge is the most
important phase of education, it helps a learner to mature his/her theoretical idea and be prepared
for the application of the theoretical knowledge in the real life problem. I am given the
theoretical basement so that I can face the difficulties effectively and efficiently that comes in
our life. As a partial requirement of BBA program each student is required to prepare a report on
restive topic as selected by the supervising teacher.

In consequence I am appointed to prepare a report. In different way this study have a personal
journey to the root of my education discipline have a great role from this study and I am able to
translate my knowledge efficiently.

This Assignment will teach students how to develop and implement their hidden abilities to
professional life. In addition, it will help students to understand the pitfall of the remittance
service. While preparing the Assignment I faced many problems. However, I believe, this will
say about my effort which I had in preparing this report. I take all responsibilities for any error of
commission or omission.

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 ACKNOWLEDGEMENT

It is almighty God who enables me to successfully complete the internship Report On “Credit
Management Performance’’ practices an evaluation of Southeast Bank Ltd”.

At first, I am expressing the gratefulness from the core of my heart to my Supervisor-,Mr Afzal
Ahmad, Associate Professor, International Islamic University Chittagong, who supervised me
throughout the whole period and has given me some time from his busy schedule for giving
accurate direction to prepare this report. Without the freedom and flexibility sanctioned by him
completion of this task would have been very tough.

I am grateful to Mr Mohammed Hafizur Rahman, Manager of Southeast Bank Limited, CDA

Avenue Branch whose co-operation and opinions have helped me much in preparing this report.
I am also thankful to executives, officers, staff members of this Branch, who have helped me to
prepare this report.

I am highly grateful to the other employees for their cordial behavior, heartiest co-operation and
supervision.

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 EXECUTIVE SUMMARY

Contemporary business world is very much competitive and the success in the competition is
achieved mainly through giving satisfaction to the ultimate consumer. The banking industry is a
service industry; it provides the customer various financial services.

The students of BBA program, who are attached with services, have to submit an Internship Report
as the partial fulfillment of the degree of Bachelor of Business Administration. This internship is the
outcome of a study General Banking Practices of Southeast Bank Ltd, a scheduled Bank under
private sector established within the field of Bank Company Act, 1991 and was incorporated as a
Public Limited Company under Companies Act, 1994 on September 28, 1999.

The objectives of the study are to discuss the activities of General banking Practices and to evaluate
the performance of banking activities of Southeast Bank Ltd.

In order to make report more meaningful and presentable, two sources of data and information have
been used widely. Primary sources of data- face to face conversation with respective of the Branch,
Personal observations, Practical experience and relevant file study as provided by the offices
concerned. Secondary sources of data – Annual report, Web site, Different books, Articles etc of
Southeast Bank Ltd.

This report basically contains nine chapters. It has been highlighted on the different type’s General
banking services of Southeast Bank Ltd, CDA Avenue Branch, Chittagong.

Finally some findings and recommendations have been identified on this study. That is the General
Banking and Credit Operation this branch does the real banking operations. The Employee of
General Banking & Credit department is too much efficient, energetic and aware of their daily task
Though its service charge is too high but the clients always come to get the better service as SEBL
provides. Last of all overall performance of General Banking and Credit Operation of Southeast
Bank Ltd, CDA Avenue Branch is satisfactory.

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 TABLE OF CONTENT

Chapter-1: Overview of the study

Particulars Page no.

1.1 Introduction 10
1.2 Objectives of the study 10
1.3 Methodology of study 11
1.4 Scope of study 11
1.5 Limitations of the study 12
Chapter-2: Organizational Overview

Particulars Page no
2.1 An overview of Southeast Bank Limited 13
2.2 Mission, vision, and objective of SEBL 14
2.3 Commitment to Clients 15
2.4 Corporate Slogan and Logo 15
2.5 Management Hierarchy of SEBL 16
2.6 Divisions Of SEBL 17
2.7 Corporate Profile 18
2.8 Branch Profile: CDA Avenue Branch 18
2.9 Products and Service Of SEBL 19
2.10 Strategic Priority 21
2.11 Training Program 21
Chapter-3:Principles Policies Of Loans & Advances
Particulars Page no

3.1Credit 23

3.2 Credit Management .23

3.2.1 Loan 23

3.2.2 Advance 23

3.3 Factors related with Loans and Advances 24

3.4 Objective Of Credit Management 24

3.5 Credit Approval Authorities 24

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 3.5.1 Functions and responsibilities of Credit Personal 24

3.6 Documents 27

3.7 Credit Appraisal & Approval Process 30

3.7.1 Branch level processing 31

3.7.2 Processing at Corporate Banking Division 31

3.7.3 Flow Chart of Approval Process 33

3.8 Lending Products Of SEBL 34

3.9 Products of SEBL as per Islamic Shariah 36

3.10 Interest/Profit rates of SEBL 38

3.11 Types Of Loan Classification 39

3.12 Base for Loan Classification 40

Chapter-4: Risk Mnagement ,Supervision , Recovery Of LoanAnd

Advances
Particulars Page no
4.1 Credit Risk 44
4.2 Risk Assessment 44

4.3 Borrower Selection 46

4.4 Credit Risk Grading Model (CRGM) 49
4.5 Monitoring And Recovery 49
4.5.1 Monitoring Policies 50
4.5.2 Non-Performing Loans: 51
4.5.3 Recovery And Collection Policies 52
Chapter-5: Findings & Analysis
Page no
54
5.1 Total Loan And Advances of SEBL, CDA Avenue Branch.
5.2 Comparative Statement of Target Of Total Loans and Advances & 55
Achievement Of Target (2014-2015)
5.3 Sector –wise allocation of Loans and Advances of CDA Avenue 57
Branch in 2015
75.4 Classification Status Of Credit Portfolio ( CDA Avenue Branch) 58
5.5 Loans & Deposit Ratio 59
5.6 Income From Loans & Advances 60
5.7 Loan Recovery Of SEBL, CDA Avenue Branch 61
Particulars

Chapter-6:Summary Of The Findings, Recommendation & Conclusion

Particulars Page no
6.1 Findings 63
6.2 Recommendation 64
6.3 Conclusion 65
References 66

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1.1 Introduction

The word “Bank” refers to the financial institution deals with money. Commercial banks are the
primary contributor to the economy of the country. They are borrowing money from the locals
and lending the same to the business as Loans and Advances. So the people and the government
are very much dependent on these banks as the financial intermediary.

9
Bank is committed to provide high quality financial services to contribute to the growth of the
country through stimulating trade and commerce, accelerating the pace of
industrialization,boosting up export, creating employment opportunity for the youth, poverty
alleviation, raising standard of living of limited income group and overall sustainable socio-
economic development of the country.
Involvement of the banking sector in different financial events is increasing day by day. At the
same time the banking process is becoming faster, easier and the banking arena is becoming
wider. In order to survive in the competitive field of the banking sector, ‘customer satisfaction’ is
very important.
In our country, all commercial bank provide three main sorts of service- general banking service,
credit facilities and foreign exchange service. Among them, Credit Department is the most
significant one. On my study I have tried to analyze the principles, policies and systems etc. of
the credit management.

1.2 Objective of the Study

The main objective of the study is to evaluate the Credit Management Performances of Southeast
Bank Limited, CDA Avenue branch, Chittagong. To achieve the main objective the following
are the specific objectives:
 To know the principles & policies of Credit Management of Southeast Bank Limited.
 To know the credit products of SEBL.
 To know the risk involved in the credit policy.
 To examine the policy regarding credit monitoring, collection and recovery of SEBL.
 To suggest some measures to improve the credit management performance.

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1.3 Methodology of the Study
The study is mainly based on secondary data. The sources of secondary data are as follows:
 Annual report of the bank.
 Files and other manuals of bank.
 Relevant books, newspapers and journals.
 Information regarding the banking sector.
 Website.

1.4 Scope of the Study

I am assigned to learn practical knowledge from Southeast Bank Limited, at CDA Avenue
Branch. In this study, I would try to concentrate on the theoretical aspect of Credit Management
Procedure. This study has covered credit principles, policies, systems, products, risk and
monitoring and recovery policy of this Bank. While preparing this report, I had a great
opportunity to have in depth knowledge of all credit activities. And I also hope this knowledge
will assist me in future.

1.5 Limitations of the Study

A sincere effort was applied to conduct the internship program.In spite of having this effort,
there exist some limitations, which acted as a barrier to conduct the program. The limitations
were:
 The main obstacle while preparing this report was time. As the tenure of the internship
program was only three months, it was not possible to highlight everything deeply.
 Due to rush banking hour it was quite difficult for me to collect the information from the
respective person.
 Confidentiality of information was another barrier that hindered the study.
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  Lack of depth knowledge and analytical ability.

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CHAPTER- TWO
ORGANIZATIONAL OVERVIEW

2.1 An overview of Southeast Bank Limited

Southeast Bank Limited is a scheduled commercial bank in the private sector established
underthe ambit of Bank Company Act, 1991 and incorporated as a public limited company
underCompany Act, 1994 on March 12, 1995.During this short span of time the bank is
successful inpositioning itself as a progressive and dynamic financial institution in the country.
The bankachieved the certificate of commencement of business by Registrar of Joint Stock
Companies andfirms on the date of its incorporation and started its operations under its private
sector.Bangladesh Bank issued banking License to the bank on March 23, 1995.Mr.M.Saifur
Rahman, Former Finance Minister of Bangladesh inaugurated the foremost branch of the bank at
1, Dilkusha commercial Area, Dhaka on 25th May of the same year.

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In present the bank has 122 Branches (AD Branches 22, Non ADBranches 100) which they are
leading very successfully all over Bangladesh. Southeast Bank was established by leading
business personalities and eminent industrialists of the country withstakes in various segments of
the national economy. They established the bank with a vision tobring efficient and professional
banking service to the people and the business community ofBangladesh to help the national
economy grow. The incumbent Chairman of the Bank is Mr. Alamgir Kabir, FCA, a
professionalChartered Accountant. The first Managing Director (MD) was Mr. Syed Anisul
Haque and the present MD is Mr. Shahid Hossain.Both of them are very renowned in the spheres
of business of the country.The bank’s operations are built upon unequivocal emphasis on
effective corporate governance. The bank’s first and the highest priority is to provide effective
services and maximum satisfaction to the customers. Theethos of harmony and co-operation is
widely practiced in the bank. Transparency indecision-making, monitoring mechanism and full
disclosure to shareholders and regulatoryauthorities are essential aspects of bank’s corporate
governance and that they create an intense pressure to rationalize bank’s services and search for
new competitive advantages.

A team of efficient professionals manages the bank. They create and generate anenvironment of
trust and discipline that encourages everybody in the bank to work togetherfor achieving the

objectives of the bank. The culture of maintaining congenial workenvironment in the bank has
further enabled to benchmark themselves better against management expectations. A
commitment to quality and excellence in service is thehallmark of their identity. In its arduous
journey since, Southeast Bank has succeeded inrealizing the dreams of those who established it.

Today it is one of the country’s leadingbanks in the private sector contributing significantly to
the national economy.Southeast Bank has become a synonym of quality banking services and
products. It has adiverse array of products and services tailored carefully to cater to the needs of
all segments of customers. Their operational strategies are structured to address the special and
often complex needs of the customers.

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2.2 Mission, Vision and Objectives of SEBL

Mission
 High quality financial services with state of the art technology
 Fast and accurate customer service
 Sustainable growth strategy
 High standard business ethics
 Steady return on shareholders’ equity
 Innovative banking at a competitive price
 Attract and retain quality human resource
 Commitment to Corporate Social Responsibility.

Vision
To stand out as a pioneer banking institution in Bangladesh and contributes significantly to
thenational economy.

Objectives
SEBL is committed to provide the best. The bank believes that Customer is always right and is
the core of everything. So providing them friendly and personalized service, tailor-made
solutions for business needs, global reach in trade and commerce at the doorsteps and high yield
on investments are the core objectives of the bank. But the bank also tries to do the best in

15
 conjunction with achieving the ultimate objective of a business organization – Wealth
Maximization.

2.3Commitment to Clients
 Provide service with high degree of professionalism and use of modern technology.
 Create long-term relationship based on mutual trust and respect.
 Respond to customer needs with speed and accuracy.
 Share their values and beliefs.
 Grow as our customers grow.
 Provide products and services at competitive pricing.
 Ensure safety and security of customers' valuables in trust with us.

2.4 Corporate Slogan and LOGO

“A bank with vision”

2.5 Management Hierarchy of SEBL

The following figure shows the hierarchy of carrier ladder in Southeast Bank Limited:

CHAIRMAN

Board of Director Managing Director and CEO Consultant

Additional Managing Director

Executive Committee
Deputy Managing Director

16 Senior Executive Vice President

Policy Committee

Executive Vice President

 Senior Vice President

Vice President

First Vice President

Assistant Vice President

First Assistant Vice President

Senior Principal Officer

Executive Officer

Senior Officer

Officer

Junior Officer

2.6 Divisions of SEBL

It would be very easy to control the system effectively, if the jobs are organizedin a particular
department. Southeast Bank Limited has donethis work very well. There are:

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2.7 Corporate Profile
Name of the Company : Southeast Bank Limited
Legal Status : Public Limited Company
Date of Incorporation : March 12, 1995
Registered Office : Eunoos Trade Centre, 52-53, Dilkusha C/A (Level 2,
3 & 16), Dhaka-1000
Line of Business : Banking (Both Conventional & Islamic Banking)
Authorized Capital : BDT 15,000 million
Paid Up Capital : BDT 9,169.50 million

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Date of Opening of First Branch : May 25, 1995
Year of Initial Public Officer : 1999
Stock Exchange Listing : April 10, 2000 (DSE) and April 24, 2000 (CSE)
Credit Rating : Credit Rating Information and Services Limited
(CRISL)
Validity of the Credit Rating : Up to June 22, 2015
Phone : 9571115 (Hunting)
Fax : 9550086, 9550093 & 9563102
E-mail : info@southeastbank.com.bd
Website : http://www.southeastbank.com.bd
Name of the Bank’s Subsidiary : Southeast Bank Capital Services Ltd, Southeast
Companies Financial Services (UK) Ltd, Southeast Exchange
Company (South Africa) Pty Ltd.

2.8 Branch Profile: CDA AvenueBranch

Head Office : Adamjee Court Annex Building-2119-120

Motijheel C/A, Dhaka-1000, Bangladesh.
CDA Avenue Branch : Ali Villa, 1640/1861 (New) CDA Avenue, Asian
Highway, East Nasirabad, Chittagong.
SWIFT Code : SEBDBDDHACDA
Category : Commercial
Type : Private
Origin : Local
No. of Employees : 23
No. of Branches : 122 (AD Branches 22, Non AD Branches 100)
No. of SME Branches : 15
Phone : 031-2552385-6, 654875
Fax No : 88-031-2552387
E-mail : gb.cd@southeastbank.com
Website : http://www.southeastbank.com.bd

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2.9 Products and Services of SEBL
Southeast Bank provides a wide variety of banking products and services to different category of
customer in response to their need of banking. They have clustered the product and services into
several segments which are directed and operated by independent divisions. Each product and
service has numerous rule-regulations, term-conditions, fees-charges and distinct characteristics.

 Conventional Banking:

The bank offers several conventional retail products which are stated below:

 Savings (SB) Account

 Current (CD) Account
 Short Notice Deposit (SND)
 Fixed Deposit Receipt (FDR)
 Double Benefit Scheme (DBS)
 Monthly Savings Scheme (MSS)
 Pension Savings Scheme (PSS)

 Islamic Banking:

The bank offers similar type of banking product on the basis of Shariah law of Finance &
Banking so that Muslims can follow the religious instructions in every sphere of life. The
brand name of Islamic Banking is ‘Tijarah’ which offers interest free concept of banking.

 Mudaraba Savings (SB) Account

 Al -Wadiah Current (CD) Account
 Mudaraba Short Notice Deposit (MSND)
 Mudaraba Term Deposit Receipt (MTDR)
 Mudaraba Double Benefit Scheme
 Mudaraba Monthly Saving Scheme (MMSS)
 Mudaraba Hajj Sanchay Prokalpa
 Mudaraba Pension Savings Scheme


 Loans and Advances:

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 The bank offers various types of loans and advances which are given below:
 Working Capital Finance
 Overdraft (OD)
 Project Finance
 Syndicated Loan
 Packing Credit
 Loan Against Export Bill
 Loan Against Trust Receipt

 Other Services:

Other services are:

 Locker Services

 Internet Banking

 Remittance Service

 Debit/ATM Card & Credit Card

 Saturday Banking (10:00 a.m. to 12:00 p.m.)

 Evening Banking Facility.

2.10 Strategic Priority

 Provide more value to shareholders.
 Repositioning Consumer Banking.
 Significantly improve customer satisfaction.
 Drive growth in SME’s.
 Culture in the organization.

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2.11 Training Program
There are effective training program for new comers of the Southeast bank. Training aims to
improve current skills and behavior. Employee training designed to achieve a relatively
permanent change in an individual that will improve the ability to perform on the job. Training
program is beneficial for both organization and employees because
 It increase job satisfaction and morale among employees.
 It increases capability to adopt new environment, technologies and products.
 It also reduce employees turnover.
 It increases employee motivation.
In implementation of the human resources development strategy, the bank established Training
Institute in 2005 at the 4th floor of Head Office premises with the vision to build up
professionals with technical, human and conceptual skills.

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23
3.1 Credit
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender’s trust in
people/firms or company’s ability or potential ability and intention to repay. In other words,
credit is the ability to command goods or services of another in return for promise to pay such
goods or services at some specified time in the future. For a bank, it is the main source of profit
and on the other hand, the wrong use of credit would bring disaster not only for the bank but also
for the economy a whole.

3.2 Credit Management

Credit management is a set of policies and procedures which set what type of lending product
will be offered, to whom it will be offered, how much it will be offered and analyze and measure
the credit risk on loan and manage all the activities regarding the loans. The aim of the credit
management is to have a loan portfolio and manage it in such a way that risks (losses) are
minimized and return is optimized. When it functions efficiently, credit management serves as an
excellent instrument for the business to remain financially stable.

3.2.1 Loan
A loan is when a person is provided money that they must repay.A bank loan is an agreement
between the borrower and the bank that the loan will be paid back in a specific amount of time at
a specific interest rate. The borrower can repay the loan all at a time or by installment.

3.2.2 Advance
Advance is a little bit different from loan. In advance, the borrower is allowed for credit limit for
a given period of time. In that given period, the borrower can withdraw money as many times as
he wants but he cannot exceed the credit limit. Again he can repay several times whenever he
wants. In advance, disbursement and repayment occurs several times. But at the end of the
period, whole credit amount must be repaid to the bank. This type of credit is allowed to business
for their working capital requirement.

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3.3 Factors related with Loans and Advances
 Risk
 Time
 Interest/ Profit rate
 Security or Collateral
 Legal Considerations
 Inflation etc.

3.4 Objectives of Credit Program

There are some objectives of credit program. These are given below:
 To provide a guideline for giving loan.
 Quick response to the customer need.
 To provide loan that can be repaid in some easy installment.
 Reduce the volume of work from top level management.
 To contribute in the socio-economic development of the country.

3.5 Credit Approval Authorities

The approving authority adheres to the regulations of the bank, theBank Companies Act 1991,
Bangladesh Bank’s circular/directives and instructions issued from time to time on credit
restrictions, margin restrictions, credit duration and its repayments andother Govt. directives.
Executives/Officers of the bank exercise their authorities only when theyare holding related
positions or are posted in the related division in head office. The entire credit proposals are
approved by Head Office ofSoutheast Bank Ltd.

3.5.1Functions and responsibilities of Credit Personnel

Credit Officers/Managers have no direct responsibilities for business generation. They will be
responsible for ensuring quality of Credit Portfolio.

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Responsibilities of Lending Staff
“Lending Staff” means MD/CEO (operations)/Head Corporate Banking/all Relationship
Officers/Managers and Head of Credit/all Credit Managers/Officers who will be involved in
soliciting and approving credit proposals. The entire lending staff is responsible for:
 Comply with the bank’s instructions, manuals, directives, policies and procedures etc. as
issued from time to time.
 Ensuring total understanding of bank’s customers.
 Exercising their authorities with due care and discretion.
 Ensure complete and up to date review and analysis of the borrowing clients before
approving a credit proposal.
 Jointly working with credit administration personnel to ensure appropriate
implementation of the credit and follow ups to perfect documentations.
 Jointly working with Credit Monitoring & recovery Division to ensure continuous follow
up and monitoring/recovery of the credit.

Corporate Division
Corporate Division is the main medium to establish and maintain relationship with bank’s
corporate and other commercial clients. The responsibilities of this division are:
 To analyze market, industry and competitive environment and adapt to changes in
strategies to achieve business goals in an on-going basis.
 To structure loan terms/agreement to reasonably ensure borrower’s capacity to repay
loans as well as to protect interest of Bank.
 To carry out credit/risk analysis, risk grading, prepare credit memo/presentations and
make recommendations.
 To update credit information on clients and review risk grading on a periodic basis and
have the changed risk grade(s) approved through Credit Risk Management (CRM), also
seek assistance from CRM regarding restructuring/rescheduling of facilities as and when
required.

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  To identify target clients, establish new customer relationships and renew/strengthen
existing relationships.
 To maintain thorough knowledge of borrower’s business and industry through regular
contacts, factory/warehouse inspections, etc. Relationship Managers should proactively
monitor the financial performance and account conduct of borrowers.
 To maintain regular contact with clients, ensure early identification and prompt reporting
of deteriorating credit sign.

Responsibilities of the Relationship Managers

The Relationship Manager (RM) is the individual who is responsible for the overall relationship
from both business and credit perspectives.
 Provide good customer service while ensuring that the bank’s interest is protected.
 Obtaining, reviewing and validating all necessary information for timely and
accurateprocessing of credit proposals.
 Ensuring appropriate implementation of the credit after approval, ongoing
review,renewal and supervising the use of the facilities in the designated manner.
And in conjunction with Credit Administration/Credit Monitoring and Recovery.
 Securing all necessary and adequate legally enforceable documentation.
 Perfecting all securities, collaterals and supports before drawdown, i.e. implementation of
approved limits.
 Ensuring the report to the superiors and senior management regarding any mark
ofdeterioration in the credit/risk-rating of the account under his responsibility.
 Ensuring that all necessary internal and external controls and policies are complied with
during the continuation of the credit.

Credit Division
Credit Division ensures that the credit approval process is responsive to customer needs with no
credit losses and negligible collection costs. Key responsibilities of Credit division are:

 Formulate the bank’s credit policies.

27
  Provide inputs to and co-ordinate with the respective business heads on the
individualgroup’s loan portfolio composition, parameters of risk assets and industry
concentration.
 To oversee bank’s credit policies, procedures and controls relating to all credit risks that
arises from corporate/commercial/institutional banking, personal banking.
 To issue facility sanction advice and send copies to Corporate Division/Branches
andCredit Administration Division.
 To review and update bank’s credit/procedural manual from time to time.

Responsibilities of the Credit Officers/Managers

The responsibilities of the Credit Officers are:
 Analyze, co-operate and as the case may recommend, credit proposals requiring approval
of Heads of Division/Deputy Managing Director (Operations)/Managing Director or
Executive Committee of the Board or Board of Directors.
 Ensure that latest CIB report is in place and does not contain any adverse report.
 Ensure that credit proposals at any level of authority are complete, correct and consistent
with bank’s established policies & procedures, comply with regulationsand meet the
lending criteria.
 Assist the Relationship Manager to structure the credit lines which meets the bank’s
lending criteria as well as client’s business needs.
 Prepare and submit all required information and reports as directed from time to time by
the Heads of Division.
 Maintain an awareness of market and business conditions in so far as these impact the
bank’s loan portfolio.

3.6 Documents
For execution of loan, bank usually use two types of documents. One is application form and
other one is charge document. Details of these documents are given below:

28
 1. Application Form:
The contents of application form for loan of different banks are almost the same and
these are as follows:
 Personal Details of Applicant:
The applicant’s personal information is written down here.
 Employment Details:
In this section, applicant has to specify the details about his employment (Name of
the Company where he belongs, designation, years of service etc.).
 Loan Details:
Amount of loan, period, interest/profit, equity, mode of repayment, security and
other charges are to be mentioned.
 Financial Details:
Total assets, total liabilities, monthly income, monthly expenses and all other
financial details of the applicant have to be mentioned.
 Particulars of Guarantors:
Details of Guarantors with their job details are to be stated here.
 Quotation:
Quotation contains the details description of goods, brand, model, size, manufacturer,
price and details of supplier.
 Letter of Assurance:
This is the assurance of the working organization of the client to pay the installment
on behalf of the client in case of the client fails to repay.
 Declaration:
This is the declaration of the borrower that all the information regarding the quotation
of goods is correct and he/she agrees with all terms and conditions of the bank.
 Certification of the Organization:
In this section the working organization will certify that the borrower is the employee
of the organization.
 Photograph:
Two copies of photograph are required for each client.

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 2. Charge Documents:
Charge documents are set of documents that contain different rules, terms and conditions. If
the borrower of loan agrees with all these items and conditions regarding the loan he/she
needs to sign all the documents. If any disagreement or irregularity occurs in future, these
documents will be exercised to suit against the borrower.
Before the disbursement of loan, the following documents must be signed by client.
Thestamps needed for these documents are paid by the clients.
 Letter of Guarantee:
This letter of guarantee is two sided. One is borrower side guarantee and another is
guarantor side guarantee. Borrower side guarantee consists of agreement of all terms
and conditions of bank as well as assurance of proper repayment of installments.
Guarantor side guarantee is the undertaking by the guarantor to pay the installments
in case of failure of the client.
 Letter of Hypothecation:
It signifies that the goods/items are hypothecated to the bank.
 Demand Promissory Note:
It is the promise of borrower to pay on demand of the bank the overdue or total
outstanding if necessary.
 Letter of Installment:
In this document, borrower promises to pay all regular and irregular installments in
due time.
 Letter of Disbursement:
This is the declaration of disbursement of loan to the borrower.
 Letter of Agreement:
The borrower is bound to pay all dues together with all charges and the borrower
givesthe authority to the bank of discharge the agreements any time due to the fault
in borrower side.
 Letter of Authority:
In this letter the borrower gives the authority to the bank to debit the account if
necessary.

30
3.7 Credit Appraisal & Approval Process
The function of credit appraisal & approval process are jointly performed at Corporate Banking
Division and at branch level which include scrutinizing the credit proposal for accepting in view
of Bank’s credit policy, risk elements and Bangladesh Bank’s Policy/regulations, checking of
credit proposal/Board Memo & issuing Sanction Letter, processing of proposal and review of
credit policy.

3.7.1 Branch level processing:

 Opening bank account (in case of fresh client).
 Collecting necessary identity documents like trade license, National ID, TIN Certificate,
Joint Stock Registration certificate, partnership Agreement etc.).
 Receiving loan application along with Financial Statement, personal Net worth statement
and other bank Statement (if any).
 Collecting CIB report from Bangladesh bank to know whether the client is a defaulter or
not.
 Visiting the business outlet and preparing a comprehensive visit report.
 Visiting collateral properties and preparing a visit report (if any collateral offered).
 Preparing a Credit Appraisal along with conducting feasibility study of the business by
applying techniques & tools like Credit risk Grading(CRG), Financial Spread sheet etc.
 Sending the appraisal attaching all mentioned documents to Head Office Corporate
Banking Division.

3.7.2 Processing at Corporate Banking Division

At Corporate Banking Division the credit proposal is further analyzed and a credit memo is
prepared from the extract of analysis. Then it is placed before approval authority that has
discretionary power of approving the credit limit.

In the analysis process, following aspects are taken in to consideration:

31
  Different Risk factors:
Different risk factors are to be identified such as- Management, Financial, Technical
and Technological, Marketing, Security etc.
 Contribution to economy:
While considering a loan proposal, its contribution to economy must be evaluated.
 Conformity with laws:
Business whether is in conformity with the government/country’s laws as permissible
as per the laws of the land.
 Sector-wise Allocation:
To minimize credit risk, give priority in the productive sectors, discourage financing
to ethically sensitive & vulnerable sector, diversification and above all to attain a
maximum point of profit growth sector-wise allocation is necessary. As per credit
policy of our bank the sector wise allocation is reviewed in each year.
 Bank’s policy:
While processing credit proposal it must be ensured that the facilities are in line with
the credit policy of the bank.
 Compliance:
It must be ensured that all the rules and regulations of Bank Companies Act,
Bangladesh Bank and other regulatory bodies are complied with. You cannot extend
any credit facility to a loan defaulter. The major tool to ensure the applicant as non-
defaulter is the CIB report.
 Documentations:
All terms and conditions related to documentation of the proposed credit facility.
After getting approval, copy of approval is sent to credit risk management division
and concerned branch. Then SEBL disburse loan to the client. Andit is necessary to
review the loan regularly.

32
3.7.3Flow Chart of Approval Process

BRANCH MARKETING TEAM

(Executive and Officers)
BOARD OF DIRECTORS

HEAD OF BRANCH
(APPROVED/ DECLINED)
AS PER DELEGATION
EC (Approved as per
Delegated Power or Declined
BEYOND CAPACITY or Recommended to Board)
RECOMMENDED TO

EC/BOARD OF
HEAD OFFICE CORPORATE DIRECTORS
BANKING DIVISION (HO corporate
division will scrutinize and prepare a full
BEYOND CAPACITY OF
blown memo with in depth analysis and
MD RECOMMENDED
proper due diligence and then)

MANAGEMENT
FORWARDED TO (SVP/EVP/SEVP/DMD/MD)

HEAD OF CRM Approving Authority as per

(For Scrutiny and input their Delegation (APPROVED/
observation/suggestions) DECLINED)
AS PER DELEGATION

RETURNED TO FORWARDED TO HOCRC

(HOCRC will review and
put their
observation/recommendatio
HEAD OFFICE CORPORATE n)
BANKING DIVISION
(To comply with the observations of
CRM)

33
3.8 Lending Products of SEBL
Continuous loan:
The loan account in which transaction may make within certain limit and have an expiry date for
full adjustment will be treated as continuous loan.
 Secured overdraft against financial obligation:

This is an advance which is given against the financial security such as FDR, DPS etc. In
this type of loan, one can withdraw and repay loan several times within a given period of
time.
 Cash Credit (Hypothecation):

In hypothecation, the real possession remains to the borrower. Loan disbursement and
loan repayment occurs several times for a given amount of money for a given period of
time.
 Cash Credit (Pledge):

When any advance is made against the pledge of goods or assets then it is known as Cash
Credit (Pledge). The possession and ownership passes to the bank. Bank takes the control
of the assets or goods. Loan disbursement and loan repayment occurs several times for a
given amount of money for a given period of time.
 Export Cash Credit:

Advance is allowed as cash credit for processing goods for export. The advance is usually
adjusted from export proceeds.

Demand Loan:
The loans that become repayable on demand by the bank will be treated as demand loans. If any
contingent or any other liabilities are turned to forced loans (i.e. without any prior approval as
regular loan)those too will be treated as demand loans.

 Loan General:

34
 It is given against personal guarantee, hypothecation of goods and land and buildings

 Loan against Trust Receipt:

This type of loan is given to importer against imported goods. This loan is given on the
basis of personal guarantee or reputation of the borrower.

 Loan against Imported Merchandise:

Loan is allowed against imported merchandise and storing the same in bank’s custody.
The bank through its approved clearing agent clears the merchandise. The advance is
adjusted by delivering the goods against payment

 Payment against Packing Credit:

In Packing Credit, the bank gives loan to exporter to prepare the goods for export against
a certain L/C.

 Payment against Documents:

The bank creates a loan account on the name of the importer and from that account bank
pays to the foreign exporter after receiving the goods and proper documents.

 Foreign Documentary Bills Purchased:

When any loan is given to exporter against any foreign documentary bills then it is
known as Foreign Documentary Bills Purchased.

 Local Documentary Bills Purchased:

When any loan is given to seller against any local documentary bills then it is known as
Local Documentary Bills Purchased.

Term loan:

35
The loan allowed for a definite period having a repayment schedule.
Fixed-Term Loan: The loans, which are repayable within a specific time period under a specific
repayment schedules will be treated as fixed term loans.
Short-Term Loan: Short-term agricultural credit will include the short-term credit as listed
under the annual credit program issued by the Agricultural Credit and Special Programs
Department (ACSPD) of Bangladesh Bank.
Short-term Micro credit will include if any micro credit repayable within 12 months. Here the
amount of credit limit will be determined by ACFID of Bangladesh Bank time to time.
Term loan includes:

 House Building loan:

This type of loan is given to build house against the mortgage of the property. This loan
is repaid in monthly fixed installment.

 Personal loan:

When any loan is given for any personal purpose, it is known as personal loan.

 Project loan:

When any long-term loan is given to any project then it is called project loan.

 Transportation loan:

This loan is given to purchase vehicle against personal guarantee of borrower.

3.9 Products of SEBL as per Islamic Shariah

The products of SEBL under Islamic Shariah are given below:

 Bai-Murabaha:

36
 Contractual buying and selling at a mark-up profit is called Murabaha. In this case, the
client requests the bank to purchase certain goods for him. The bank purchases the goods
as per specification and requirement of the client. The client receives the goods on
payment of the price which includes mark-up profit as per contract. Under this mode of
investment the purchase/ cost price and profit are to be disclosed separately.

 Bai-Muajjal:

Bai-Muajjal means sale for which payment is made at a future fixed date or within a fixed
period. In short, it is a sale on credit.
In Bank’s perspective, Bai-Muajjal is treated as a contract between the bank and the
client under which the bank sells to the client certain specified goods, purchased as per
order and specification of the client at an agreed price payable within a fixed future date
in lump sum or by fixed installments.

 Hire-purchase Musharaka Mutanaqasa (HPMM):

Hire-purchase Musharaka Mutanaqasa means purchasing and acquiring ownership by one

party by sharing in equity and paying rents for the rest of the equity held by the bank or
other party. Under this mode, the bank and the client on contract basis jointly purchase
vehicles, machineries, building, apartment etc. The client uses the portion of the assets
owned by the bank on rental basis and acquires the ownership of the same assets by way
of paying banks portion of the equity on the assets in installments together with its rents
as agreed upon.

 Quard:

It is a mode to provide financial assistance/loan with the stipulation to return the principal
amount in the future without any increase thereon.

37
3.10 Interest/Profit rates of SEBL

Lending Categories/ Sectors Rate

Mid Rate Maximum

Rate
1. Agriculture - 11.00%
2. Large and Medium Scale Industries (Term loan) 12.00% 13.50%
3. Small Industries (Term loan) 13.00% 14.50%
4. Working capital
(Large and Medium Scale Industries)
a) Jute 12.00% 13.50%
b) Other than Jute 12.00% 13.50%
5. Export
a) Jute goods export - 7.00% (Fixed)
b) Other export - 7.00% (Fixed)
6. Commercial Lending
a) Jute Trading 13.00% 14.50%
b) Commercial lending (others) 13.00% 14.50%
7. Housing Finance
a) Real Estate Developers 12.50% 14.00%
(except individual retail home loan)
8. Consumer Credit and Retail Finance 13.50% 15.00%
9. Credit Card - 2.50% per
month (Fixed)
10. Finance to NBFIs 11.00% 12.50%
11. Other loans
a) SME Finance 13.00% 14.50%
b) Others 13.00% 14.50%

38
3.11 Types of Loan Classification
Loans are usually divided as Regular or Unclassified & Classified.They are sub-divided on their
payment nature and expirydate of the credit.

Loan Classification:
1. Unclassified (Regular):

Unclassified means the activities of Loans and Advances are good but show some weaknesses in
the borrower’s financial condition in Special Mention Account.
 Standard:

Standard means Loan repayments are running properly.

 Special Mention Account (SMA):

It captures early warning signals for accounts showing first sign of weakness. But it is not
treated as defaulted loan.

2. Classified:

Any bank Loan that is in danger of default. Classified Loans have unpaid interest and principal
outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the
borrower.
 Sub- standard (SS):

A Loan, value of which is impaired by evidence that the borrower is unable to repay but
there is a reasonable prospect that the loan’s condition can be improved is considered as
sub-standard.
 Doubtful (DF):

A Loan is doubtful when its value is impaired by evidence it is unlikely to be repaid in

full but special collection efforts might eventually result in partial recovery.
 Bad/Loss (BL):

A Loan is considered bad when it is very unlikely that the loan can be recovered.

39
3.12Base for Loan Classification
Loans are classified on the basis of two criteria. These are:
1. Objective criteria. (OB)2.Qualitative judgment (QJ)

Objective criteria (OB):

(1) Past Due/Over Due:
 Continuous Loan:

Any Continuous Loanif not repaid/renewed within the fixed expiry date for
repayment or after the demand by the bank will be treated as past due/over due from
the following day of the expiry date.

 Demand Loan:

Any Demand Loanif not repaid within the fixed expiry date for repayment or after the
demand by the bank will be treated as past due/over due from the following day of the
expiry date.

 Fixed Term Loan:

In case of any installment or part of installment of a Fixed Term Loan is not repaid
within the fixed expiry date, the amount of unpaid installment's will be treated as past
due/over due from the following day of the expiry date.

 The Short-term Agricultural and Micro-Credit if not repaid within the fixed expiry
date for repayment will be considered past due/over due after six months of the expiry
date.

(2) All Unclassified Loans other than Special Mention Account (SMA) will be treated as
Standard.

40
(3) A Continuous, Demand & Term Loan will remain overdue for 60 days/2 months or moreit
will put into special mention account (SMA).Special mention account will be reported to CIB of
Bangladesh Bank. It is the first sign of weakness of loan A/C.
(4)Loan in SMA and Sub-Standard will not be treated as default Loan.
(5)Any Continuous loan will be classified as:
 Sub-Standard: If it is past due/overdue for 3 months but less than 6 months.
 Doubtful: If it is past due/overdue for6 months but less than 9 months.
 Bad/Loss: If it is past due/overdue for 9 months and above.

(6) Any Demand loan will be classified as:

 Sub-Standard: If it is past due/overdue for 3months but less than 6 months.
 Doubtful: If it is past due/overdue for 6 months but less than9 months.
 Bad/Loss: If it is past due/overdue for 9 months and above.

(7.a) Incase of Term Loan (Above Tk. 10.00 Lac), any installment or part of installment amount
remain unpaid within due date it will be classified as:
 Sub-Standard: If the amount or part of installment past due is equal to 3 months or more
than the entire balance of Loan amount will be classified as above.
 Doubtful: If the amount or part of installment past due is equal to 6 months or more than
the entire balance of Loan amount will be classified as above.
 Bad/Loss: If the amount or part of installment past due is equal to 9 months or above
then the entire balance of Loan amount will be classified as above.

(7.b) Incase of Term Loan (upto Tk. 10.00 Lac), the installment or part of installment amount is
not paid within due date it will be classified as:
 Sub-Standard: If the amount or part of installment past due is equal to 6 months or more
than the entire balance of Loan amount will be classified as above.
 Doubtful: If the amount or part of installment past due is equal to 9 months or more than
the entire balance of Loan amount will be classified as above.
 Bad/Loss: If the amount or part of installment past due is equal to 12 months or above
then the entire balance of Loan amount will be classified as above.

(8) Short term Agricultural loan & Micro Credit:The STAMC Loan will be classified as:
41
  Sub-Standard: If the Loan is not repaid within due date after a period of 12 months.
 Doubtful: If the Loan is not repaid within due date after a period of 36 months.
 Bad/Loss: If the Loan is not repaid within due date after a period of 60 months or more.

Qualitative Judgment (QJ):

If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand Loan
or Fixed Term Loan, the same will have to be classified on the basis of qualitative judgment
though it is not classifiable on the basis of objective criteria.
If any situational changes occur in the stipulations in terms of which the loan was extended or if
the capital of the borrower is impaired due to adverse conditions or if the value of the collateral
decreases or if the recovery of the loan becomes uncertain due to any other unfavorable situation,
the loan will have to be classified on the basis of qualitative judgment.
1) Special Mention Account (SMA): The Loan account shows occasional overdrawn, declining
profitability, in compliance of loan formalities, poor control over collateral, insufficient liquidity
and problem in strategic planning.
2) Sub-Standard: It shows recurrent overdrawn, poor account turnover, low profitability, less
cash flow, inadequate liquidity, week management, insufficient primary securities & improper
documentation on collateral securities.
3) Doubtful:It showspermanent overdrawn, no transaction at all, operational losses, Loss of
markets, Marginal cash flow, very poor management and doubt in integrity of ownership, fake
financial statement.
4) Bad/Loss:This showsseeking new finance for operational losses, assets sales to meet up
operational loss/expenses, no repayment capacity except liquidation. Owners are embezzled in
criminal, fraudulent money laundering activities.

42
43
4.1 Credit Risk
Risk is the element of uncertainty or possibility of lossthat exist in any business transaction.
Credit/Loans and Advances risk is the likelihood that a borrower or counterparty will be
unsuccessful to meet its obligation in accordance with agreed terms and conditions.Also we can
say credit risk means as the potential that a bank borrower or counterparty will failto meet its
obligations in accordance with agreed terms.

4.2 Risk Assessment

A prudent banker should always adhere to the following general principles of lending funds to
his customers.
(1) Background, character and ability of the borrowers (2) Purpose of the facility (3) Terms of
facility (4) Risk elements (5) Safety (6) Security (7) Profitability (8) Sources of repayment (9)
Portfolio Diversification. A general rule is that you should never put “ALL YOUR EGGS” in
one basket.
It should be remembered that selection of appropriate borrowers, proper follow-up and end-use
supervision through constant close contact with the borrowers are the cornerstones for timely
recovery of credit.
Before selecting a customer and recommendation for financing, the credit Officer/Relationship
Manager/Branch manager/ Direct Sales Executive (DSE) should observe the following basics of
lending:

1. Management/Ownership/Corporate Risk assessment:

 Are there adequate ability and experience in senior management?

 Is there adequate depth and succession planning?

44
  Is there any conflict amongst owners/senior managers that could have
seriousimplications?

2. Business and Industry Risk assessment:

 Are there any significant concentrations of sales (by customer, industry, county and
region)?
 Any supplier concentration which might impact company’s business adversely?
 How does the borrower rate with its competitors in terms of market share?
 Can increased direct production costs be easily passed on to customers?
 Does the borrower deal in any specific product that may be subject to obsolescence?
(Deals with adverse industry situation or unfavorable business conditions that will impact
borrower’s capacity to meet obligation i.e. the business outlook, growth of industry,
market competition,barrier to entry/exit).

3. Financial Risk (Historical/Projected) assessment:

Risk that counterparties will fail to meet obligation due to financial distress.
 Does the borrower produce financial statements on time?
 Is working capital adequate?
 Has the customer actual title to stock?
 Have financial covenants been met?
 Any significant change in asset conversion cycle? (Account Receivables, Payables and
Inventory etc.)
 Are there enough cash flows to meet obligations?

4. Facility Structure & Security Risk assessment:

Facility structure deals with the structure of a facility during approval based on business/
project nature. Security risk deals with quality and strength of the security in case of default.

45
  Are facilities justified by the borrower’s business?
 Is any capital/long term expenditure being financed by short time borrowing?
 Has all the security been perfected in accordance with the loan application?
 Have any valuation and inspection been undertaken since the last application?
 If you hold a guarantee, do you consider it has value?
 Is the security fully insured for all risks and the bank’s nominated as loss payee?
 Has the credit rating of the borrower deteriorated and have you considered the
requirement for additional security?
 Is the property located in prime area?
 Is it easy to dispose of?

5. Relationship Assessment:

This risk area covers evaluation of limit utilization, account performance, conditions/
covenants compliance by the borrower and their deposit relationship.
 Has the borrower complied with the terms and conditions of the facility?
 Adverse feature include: any past dues/excesses/delays/check returns and or defaults in
covenants and/or failure to meet interest when due.
 Does the account fluctuate with the seasonally of the business?
 Has the relationship strategy and earnings for the last twelve months been met?
 Do the clients maintain their deposit in other bank(s)?

6. Critical Risk & Mitigating Factors:

The bankers must assess the critical risks of facilities given and ways of mitigation of those risks.
Some of the critical factors are:
 Volatility
 High debt
 Rapid growth
 Acquisition
 Debtors issues
 Succession
46
4.3Borrower selection
SEBL tries to judge the possible client based on some criteria. These criteria are called the C’s of
good and bad loans. These C’s of good loans aredescribed below:

 Character:
The outcome of analyzing the character is to have overall idea about the integrity,
experience and business sense of the borrower. Two variables: interaction/interview and
market researchare used to analyze the character of the borrower.

 Capital:
Capital is the backbone of a business. For identifying the capital invested in the business
can be disclosed using the followingindicators. a) Financial Statements b) Receivable and
payable statements for practically assess the business position.

 Capacity:
Capability of the borrower in running the business is highly emphasized in the time of
selecting agood borrower.
a) Entrepreneurship skills i.e. risk taking attitude.
b) Management competencies both marketing and products detail ability to take decision.

 Collateral:
The amount of assets the applicant has available for use in securing the credit. The larger
the amount of available assets, the greater the chance that a firm will recover its funds if
the applicant defaults.A review of the applicant’s balance sheet, asset value appraisals,
and any legal claimsfiled against the applicant’s assets can be used to evaluate its
collateral.

 Cash Follow:
Cash flow is the vital factor that is used to identify whether the borrower will have
enough cashto repay the loan or advance. Cash keeps the liquidity to ensure repayment.

47
 The relationshipmanager tries to identify the annual cash flow from the submitted
statements

.
 Conditions:
The current economic and business climate as well as any uniquecircumstances is
affecting either party to the credit transaction. According to Golden and Walker (1993),
there are five Cs of bad loans which represents things to guard against in order to help
prevent problems. They include:

 Complacency:
Complacency refers to the tendency to assume that because things were good in thepast
they will be good in the future. Common examples are an over reliance on guarantors,
reported net worth or past loan repayment success.

 Carelessness:
Carelessness involves poor underwriting, typically evidenced by inadequate
loandocumentation, a lack of current financial information and a lack of protective
covenants in the loan agreement. Each of thesemakes it difficult to monitor a borrower’s
progress and identify problems before theyare unmanageable.

 Communication breakdown:
Loan problems often arise when a bank’s credit objectives and policies are not
clearlycommunicated. This is communication breakdown.

 Contingency:
Contingencyrefers to lenders’ tendency to play down or ignore circumstances in which a
loan might in default.

 Competition:

48
 Competitioninvolvescompetitors’ behavior rather than maintaining thebank’s own credit
standards.

4.4 CreditRisk Grading Model (CRGM)

To measure the credit risk, SEBL follows the CRGM provided by the Bangladesh Bank. In this
model, the whole loan is measured in five criteria. And there has assigned points for every
criterion. And the total grade point of all the criteria is 100. The criteria and their assigned marks
are mentioned below:

4.4.1
Financial Risk 50%
Business/ Industry Risk 18%
Management Risk 12%
Security Risk 10%
Relationship Risk 10%

4.4.2
Grading Short Name Marks Number
Superior SUP 85-100 1
Good GD 75-84 2
Acceptable ACCPT 65-74 3
Marginal/Watch list MG/WL 55-64 4
Special Mention SM 45-54 5
Sub standard SS 35-44 6
Doubtful DF 25-34 7
Bad & Loss BL <25 8

4.5 Monitoring and Recovery

The most important part of credit management is credit monitoring, recovery and collection.
Credit Risk Management (CRM) unit at branch level and CRM Division at Head Office manage

49
that difficult task. It is much more difficult to recover the money than disburse it. So to ensure
success of credit management and smooth earning from credit portfolio, strong monitoring
policy, guidelines and procedures are needed.
Southeast Bank limited has a very practical policy and guidelines which was formulated
according to concurrent real banking scenario and is revised regularly according to current
demand of banking industry. They also maintain realistic procedures to accomplish the goals of
monitoring, recovery & collection of credit facilities.

4.5.1 Monitoring Policies:

To minimize credit losses, monitoring procedures and systems should be in place which will
provide an early indication of the deteriorating financial health of a borrower. The credit
monitoring process in bank is vested on CRM Division. The Head of CRM Division will report
the exceptional list of assets on daily basis on the following categories:
 Past due (which are not paid or renewed at maturity) principal or interest/profit payments,
past due trade bills, account excesses, and breach of loan covenants.
 Loan terms and conditions are monitored, financial statements are received on a regular
basis and any covenant breaches or exceptions are referred to the Credit Officer/RM team
for timely follow-up.
 Timely corrective action is taken to address findings of any internal, external or regulator
inspection/audit.
 All borrower relationships/loan facilities are reviewed and approved through the
submission of a Credit Application at least annually.
The Bank has a developed IT system which will enable to produce the above information for
Head Office as well as local review. CRM Division regularly will keep follow up on and
corrective action takes in a timely manner before the account deteriorates further.

Early Alert Process:

An Early Alert Account is one that has risks or potential weaknesses of a material nature
requiring monitoring, supervision, or close attention by management.

50
If these weaknesses are left uncorrected, they may result in deterioration of the repayment
prospects for the asset or in the bank’s credit position at some future date with a likely prospect
of being downgraded or worse within the next twelve months.
Early identification, prompt reporting and proactive management of Early Alert Accounts are
prime credit responsibilities of all Credit Officers/ RMs and must be undertaken on a continuous
basis.
Early Alert Report:
An Early Alert report should be completed by the Credit Officers/RM and sent to the approving
authority for any account that is showing signs of deterioration within seven days from the
identification of weaknesses. The Risk Grade should be updated as soon as possible and no delay
should be taken in referring problem accounts to the Credit Administration Department for
assistance in recovery.
Moreover, regular contact with customers is to be maintained to enhance the likelihood of
developing strategies mutually acceptable to both the customer and the bank.

4.5.2 Non-Performing Loans:

Loans where the borrower has failed to repay on time or in full, but which are not considered
tobe in default, the borrower has merely not performed butthe bank is still booking interest/profit
due. Non-performing loans spell trouble for bankswhich willoften reschedule the debt with
different conditions, rather than allowing it to lie on the bookswithout producing any return.

Non-Performing Loans Monitoring Procedures:

All NPLs are assigned to an Account Manager within the Recovery Unit (RU), who is
responsible for coordinating and administering the action plan/recovery of the account and
should serve as the primary customer contact after the account is downgraded to sub-standard.
Whilst some assistance from Marketing/ Relationship Management may be sought, it is essential
that the autonomy of the RU be maintained to ensure appropriate recovery strategies are
implemented.
On a quarterly basis, a Classified Loan Review Report (CLR) to be prepared by the RU Account
Manager to update the status of the action/ recovery plan, review and assess the adequacy of
provisions and modify the bank’s strategy as appropriate. At present all the rescheduling is
approved by the Board.

51
4.5.3 Recovery & Collection Policies:

The functions of Recovery is to Supervision of all the loans & Advances, associated
documentation matters, legal matters such as all legal opinions, vetting and completion of
documentation formalities, filing of suits against the defaulting borrowers, follow-up of all types
of court cases, follow-up of all recovery works of classified loans with special emphasis to Top–
20 defaulters, execution of warrant of arrest, physical verification of mortgage properties, liaison
with all panel lawyers and taking over possession of the property possessed by the bank by virtue
of court order.The recovery function includes:

 Determine Account Action Plan/Recovery Strategy.

 Pursue all options to maximize recovery, including placing customers into receivership or
liquidation as appropriate.
 Ensure adequate and timely loan loss provisions are made based on actual and expected
losses.
 Regular review of worse accounts.

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5.1 Loans and Advances of SEBL, CDA Avenue Branch
53
Loans and Advances of Southeast Bank Limited, CDA Avenue Branch is given below:
Year Loans and Advances
(Taka in Crore)
2008 124.88
2009 168.09
2010 246.49
2011 317.63
2012 365.35
2013 305.48
2014 337.13
2015 257.32
Source: Branch Data Base, 2008-2015

Graphical Representation of above Figures:

Loans and Advances Position 2008-2015

400
350
300
Taka in Crore

250
200 365.35
317.63 305.48 337.13
150 Loans and Advances Amount
257.32
246.49
100 168.09
124.88
50
0
2008 2009 2010 2011 2012 2013 2014 2015

Year

From graphical presentation, it is found that the amount of Loans and Advances is 365.35 (Taka
in Crore) in 2012, which is the highest in position of the diagram. On the other hand in 2008 the
amount is 124.88 (Taka in Crore) which is worst in position of this diagram. The amount of
Loans and Advances has risen sharply from 2008 to 2012 and then fall down in 2013. Again it
has risen in 2014 but fall down in 2015. However we can comment that the overall Loans and
Advances amount of SEBL, CDA Avenue Branch isgood in position.

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5.2 Comparative Statement of Target of Total Loans and
Advances and Achievement of Target (2014 and 2015)
2014 ((July-December) (Taka in Crore)
Month Monthly Target Achievement Achievement of
Target in Percentage
July 329.07 237.41 72.15%
August 332.91 239.22 71.86%
September 336.92 260.44 77.30%
October 340.87 275.36 80.78%
November 344.88 334.51 96.99%
December 350.00 337.13 96.32%

Source: Branch Data Base, 2014

2015 (July-December) (Taka in Crore)

Month Monthly Target Achievement Achievement of
Target in Percentage
July 373.11 306.97 82.27%
August 378.96 305.10 80.51%
September 385.07 308.08 80.01%
October 391.09 306.72 78.43%
November 397.20 309.90 78.02%
December 405.00 257.32 63.54%

Source: Branch Data Base, 2015

Graphical Representation of above Percentage Figures:

55
 Achievement of Target in Percentage:
2014 (July-December) and 2015 (July-December)
120.00%

100.00%

80.00%
Fig in Percentage

60.00% Target achieved in 2014 (July-

December)
40.00% Target achieved in 2015 (July-
December)

20.00%

0.00%
l y st be
r
be
r
be
r
be
r
Ju gu m to m
Au e em e
p t Oc v c
Se No De

Months

From graphical presentation, we observe that achievement of target is in good position in 2015
(July-September) than 2014 (July-September) and achievement of target is in worse position in
2015 (October-December) than 2014 (October-December).

5.3 Sector –wise allocation of Loans and Advances of CDA

Avenue Branch in 2015

Since inception Southeast Bank Limited is consistently contributing to the economic

development of the country by ensuring smooth flow and sustainable growth of credits IN
different sectors

56
 Investment Area Percentage
Agriculture 0.92%
Industry (Other than Working Capital) 22.86%
Working Capital Financing 20.84%
Export Credit 5.75%
Commercial Credit 24.22%
Small and Cottage Industries 0.64%
Others 24.78%
Source: Annual Report, 2015

Graphical Representation of above Percentage Figures:

Sector-wise allocation of Loans and Advances

25% 1% 23%
Agriculture
Industry (Other than Working
Capital)
1% Working Capital Financing
Export Credit
Commercial Credit
Small and Cottage Industries
21% Others
24% 6%

The bigger portion of Southeast Bank’s portfolio consists with Commercial Credit and Industry
Credit. And they also have a great amount of investment in Others Project. But Small and
Cottage Industries have very small investment.

5.4 Classification Status of Credit Portfolio (CDA Avenue

Branch)

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Southeast Bank strictly follows the rules and regulations of Bangladesh Bank
regardingclassification of loans and advances. The unclassified loans of the bank stood at BDT
2134.014 millionand classified loans stood at BDT 94.66 million as on 31st December, 2015.

Status Amount Percentage

BDT in Million
A. Unclassified Loans
 Standard 1956.89 91.70%
 Special Mention 96.43 4.05%
Account
Sub-Total 2134.014 95.75%
B. Classified Loans
 Sub-Standard 19.97 0.90%
 Doubtful 16.33 0.73%
 Bad/ Loss 58.36 2.62%
Sub-Total 94.66 4.25%
Grand Total 2228.67 100%

Source: Annual Report, 2015

5.5 Loans and Deposit Ratio

Year 2011 2012 2013 2014 2015

Loans and 71.77% 76.35% 70.82% 79.56% 83.13%
Deposit Ratio

(Figure 5.5: Loan and Deposit Ratio of SEBL, CDA Avenue Branch during the period from 2011
to 2015)

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 82.00%

80.00%

78.00%

76.00%

74.00%

72.00%

70.00%

68.00%

66.00%
2011 2012 2013 2014 2015

Loans And Deposit Ratio

The above table and graph shows that the ratio of Loan and Deposit of Southest Bank
Limited, CDA Avenue Branch is fluctuated year by year. The Loan and Deposit Ratio
was highest in 2015 and the percentage was 83.13%. However in 2013 it was lowest and
the percentage was 70.82%.

5.6 Income from Loans and Advances

Year 2011 2012 2013 2014 2015

Amount (In 29.95 30.39 32.31 32.78 33.39
million

Figure 5.6: Income from Loans and Advances of SEBL, CDA Avenue Branch during the
period from 2011 to 2015 (taka in million)

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 34

33

32

31

30

29

28
2011
2012
2013
2014
2015

Income from Loans And Advances

Above the table and graph shows the performance of Income from Loans and Advances
ofSouthesr Bank Limited, CDA Avenue Branch are increasing year by year from 2011 to
2015. Income from Loans and Advances was highest in 2015 and the figure was 33.39
million taka. However, in 2011 it was lowest and the figure was 29.95 million taka.

5.7 Loan Recovery of SEBL, CDA Avenue Branch

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 93%

93% 92%

92%

91% 90%

90% 89%

89% 88%

88%

87%

86%

85%
2011 2012 2013 2014 2015

Loan Recovery of SEBL, CDA Avenue Branch

Figure 5.7 Loan Recovery of SEBL, CDA Avenue Branch during the period from 2011 to
2015 (in percentage)

On the above, the graph showing the recovery position of SEBL, CDA Avenue Branch as
on 31, Dec 2015. In 2015 recovery rate was highest & rate was 93%. But in 2014
recovery rate was lowest, in that year recovery rate was 88%, which are way less than
2015. From 2011 to 2014, we can see recovery rate was fluctuated year by year. The
recovery rate was poor in that period as economy hampered a lot due to political crisis in
recent years.

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6.1 Summary of Findings

62
After analyzing the financial & overall performance of Southeast Bank Limited some findings
have been identified.

 The highest amount invested in commercial credit sector which is 24.22% of total amount
of loan.
 Working Capital of Financing loan of the branch was 20.84% in 2015 and Industry loan
was second priority & rate was 22.86% of total amount of loan.
 Small & cottage Industry loan is not sound in the branch.
 The bank uses some modern technology such as CBS. So, their service is better than most
of the bank.
 The credit analysts have a strong background in accounting financial statement analysis,
business law and economics along with good negotiating skills. This lessens the
possibility of bad debt.
 A systematic loan approval process is maintained.
 The most popular loan product is personal loan.
 Sometimes bank prepares CRG score based on un-audited balance sheet.
 There are eight grades of credit risk. Actually they follow Good- Satisfactory model for
grading the risk.
 The total amount of loans & advances is increasing from year to year (Figure 5.1).
 The total income from loans and advances is in increasing trend (Figure 5.6).
 Loan recovery rate has been improved compared to previous years (Figure-5.7)
 There is a small amount of agricultural investment.

6.2 Recommendations

63
Southeast Bank Limited is one of the potential banks in the banking sector. The credit
department of Southeast Bank Bank Limited, CDA Avenue Branch is a large and busy branch.
Therefore it is not an easy job to find so many things during the very short period of internship
program. Though now 1 would like to present my recommendations improve the banking service
and make the customer more satisfied.
1) Bank should prepare the CRG score sheet based on audited balance sheet. Because it
shows appropriate position of the firm. So it reduces the credit risk.
2) SEBL liquidity position is better than other banks. So management should hold this
position for the future.
3) Effective decision should be taken by the trust for the more deposit because the more
deposit, the more loans, the more profit & the more investment.
4) Effective and efficient initiative is necessary to recover the default loans.
5) The loan documentation and verification should be done fairly and properly.
6) They should diversify their Loan products.
7) The credit department, strict supervision is necessary to avoid loan defaulters. The bank
official should do regular visit to the projects.
8) SEBL should take initiative for agricultural sectors.
9) SEBL should attract customer to provide loan at minimum rate compare to other bank.
10) SEBL should improve the recovery rate of Loan & Advances.

6.3 Conclusion

64
Banking sector is an important vehicle for business. It has no doubt that as a developing country
we need to strengthen our banking sector. Now a days, banks are doing almost same thing but in
a different manner. But all of them intend to work for the welfare of the nation. Southeast Bank
Limited is not different from them.SoutheastBank Limited also plays an important role in our
national economy.
It was huge gratification for me to do my internship program in a venerated organization like
Southeast Bank Limited, CDA Avenue Branch. It presents me ample opportunity to scrutinize
the functions of bank through the superior assistance of its members.
Southeast Bank Limited is a company which has so far shown good performance and holds the
strongest position in the banking market. Overall the bank must make a positive attempt to be
more outward looking in their goals and aware of what is happening.
I hope this internship program will assist me in my career build-up.

6.4 REFERENCES
1. Annual Reports of Southeast Bank Limited.

65
2. Southeast Bank Limited, website: www.southeastbank.com.bd
3. Bangladesh Bank website.
4. Previous year’s internship report.
5. Various leaflets of the Bank.
6. Daily affairs of Southeast Bank Limited, CDA AvenueBranch.

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