Port City International University

An Internship Report
On
Credit Risk Management of Bangladesh Commerce Bank Limited:
A Study on A.K.Khan Branch, Chattogram

(The internship report is submitted to the Department of Business Administration, Port City
International University, in partial fulfillment of the requirement for the Degree of Bachelor of
Business Administration with major in Finance.)

Submitted to
Dr. Rajib Chakraborty
Assistant Professor

Department of Business Administration

Port City International University

Submitted By
Joy Raj Bhowmik

ID: BBA 01707063

Major: Finance
Department of Business Administration

Port City International University

 Letter of Submission
To

Dr. Rajib Chakraborty

Assistant Professor

Department of Business Administration

Port City International University, Chittagong.

Subject: Submission of internship report on “Credit Risk Management of

Bangladesh Commerce Bank Limited: A Study on A.K.Khan Branch,
Chattogram”.

Dear Sir,
With due respect, it is an immense pleasure for me that I am submitting my
internship report on Credit Risk Management of Bangladesh Commerce Bank
Limited: A Study on A.K.Khan Branch, Chattogram. As a student of Port City
International University I have prepared my internship report on Credit Risk
Management of Bangladesh Commerce Bank Limited: A Study on A.K.Khan
Branch, Chattogram. The duration spent working on this has been very beneficial
for me as I was able to gain knowledge which I believe that would be helpful for
my future job life. I have tried my level best to gather and organize all the
information required for this Internship report and come up with an effective
report.

I shall be highly obliged if you are kind enough to receive this report and provide
your valuable judgment.

Sincerely yours

……………………………………
Joy Raj Bhowmik
ID: BBA 01707063
Program: BBA
Major: Finance
Department of Business Administration
Port City International University.
I
 Supervisor‟s Certificate
The report titled “Credit Risk Management of Bangladesh Commerce Bank
Limited: A Study on A.K.Khan Branch, Chattogram” is submitted as partial
requirement of BBA program. This report has been prepared by Joy Raj
Bhowmik, ID: BBA 01707063 under my supervision and guidance. I am pleased
to state that Joy Raj Bhowmik worked hard in preparing this report and he has
been able to present a good report. The data and findings presented in the report
seem to be authentic. As per my knowledge goes it was not submitted to other
university or institute for getting degree or diploma or for publication.

I wish him every success in life.

……………………………
Dr.Rajib Chakraborty
Assistant Professor
Department of Business Administration
Port City International University, Chittagong.

I
I
 Student‟s Declaration
I am Joy Raj Bhowmik, hereby state that the presented report of internship titled “Credit
Risk Management of Bangladesh Commerce Bank Limited: A Study on A.K.Khan
Branch, Chattogram” is exclusively prepared and updated by me after completion of three
months’ work in Bangladesh Commerce Bank Limited. I solemnly confirm that the report is
entirely prepared for my academic requirement not for any other purposes.

The entire work has been planned and carried out by me under the supervision of Dr. Rajib
Chakraborty. Assistant Professor, Department of Business Administration, Port City
International University, Chattogram. I also confirm that the report is only prepared to meet
academic requirement not for any other purpose. It will not act anything that will hamper the
confidentiality and interests of Bangladesh Commerce Bank Limited.

Sincerely yours,

……………………………………
Joy Raj Bhowmik
ID: BBA 01707063
Program: BBA Major: Finance
Department of Business Administration
Port City International University.

III
Internship Certificate

IV
 Acknowledgements
At the beginning, I would like to express my thanks to the Almighty Allah for giving me the
patience to complete the Report on title “Credit Risk Management of Bangladesh Commerce
Bank Limited: A Study on A.K.Khan Branch, Chattogram”.

I express my gratitude to my academic Dr.Rajib Chakraborty, Assistant Professor Department

of Business Administration, Port City International University, Chittagong. Without his kind
support, this study would have been a failure.

I also want to thank the “Human Resource Management” team who provided me with all the
necessary information, guidance and support that I required in making this report. They also
made sure that I have a great working experience Bangladesh Commerce Bank Limited by
delegating me business tasks which I know would serve me extremely well in the foreseeable
future.

Finally, I would like to convey my gratitude to my Parents. Without their contribution it would
not be possible for me to continue my job as well as my BBA program.

V
 Executive Summary
Financial services firms are in the business of accepting risk. Primary aims of any financial
services firm are collect and manage risks on behalf of their customers and make a profit for
its shareholders. The ongoing development of contemporary risk management methods and
the increased use of innovative financial products have brought about substantial changes in
the business environment faced by credit institutions today. This report is intended to assist
the reader in detailed understanding the credit risk management process. It also attempts to
capture the procedures practiced in Bangladesh Commerce Bank Ltd in relation to credit
handling. The purpose of this report is to have an idea about the credit risk management
procedure in Bangladesh Commerce Bank Ltd and then to assess its effectiveness in
connection with. The report has been segregated into six separate chapters for the
convenience of the reader. Chapter one is the introductory part. It gives an idea about the
objectives, scope and methodology of the report. Chapter two provides the overview of
Bangladesh Commerce Bank Ltd. Chapter three contains theoretical framework of the credit
risk management. It is arranged in a manner that will give the reader a sequential idea of
credit handling process. It incorporates the discussion on credit, advance offered credit policy
etc. Chapter four provides Financial Analysis of Bangladesh Commerce Bank Ltd. Chapter
five includes the findings and recommendations of the study.
Finally, the study concludes that the overall performance of credit risk management
operations is good but not best. They can identify or realize few problems in credit division.
The report will be viewed as real scenario of their present condition which will be helpful to
the management of the management of the organization to take required steps for ensuing
better services.

VI
 Table Of Contents
Serial Topic Page No
Letter of Submission I

Supervisor’s Certificate II
Student’s Declaration III
Internship Certificate IV
Acknowledgement V
Executive Summary VI
Chapter Introduction 1
One

1.1 Introduction 2
1.2 Background of the Study 3
1.3 Origin of the Study 4
1.4 Objectives of the Study 4
1.5 Methodology of the Study 5
1.6 Statement of the Problem 5-6
1.6 Scope of the Study 6
1.7 Limitations of the Study 6
Chapter Overview of Bangladesh Commerce Bank 7
Two Ltd
2.1 An Overview of Bangladesh Commerce Bank Ltd 8
2.2 Vision 9
2.3 Mission 9
2.4 Strategic Priorities 9
2.5 Legal Status 10
2.6 Core Business 10
2.7 Subsidiary Organizations 11
 2.8 Services of CBISL 12
2.9 Branches of BCBL 12
2.10 BCBL Training Institute 13
2.11 BCBL Products 14-15
2.12 Organization Structure 16
Chapter Theoretical Aspects of Credit Risk 17
Three Management
3.1 Introduction 18-20
3.2 Different Types of Credit Facilities 20-22
3.3 Types of Credit Risk 22
3.4 Overall Procedure for Sanctioning Loan 23-27
3.5 Credit Administration 27-30

3.6 Disbursement 30-31

3.7 Credit Recovery 31-32

Chapter Performance Analysis of Bangladesh 33
Four Commerce Bank Ltd
4.1 Financial Analysis 34-41
Chapter Findings ,Recommendations & Conclusion 42
Five
5.1 Findings 43
5.2 Recommendations 44
5.3 Conclusion 45

References 46
Chapter One
Introduction

1
1.1 Introduction
The word “Bank” refers to the financial institutions dealing 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.
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.
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lenders
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.
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.
Credit management is the process of granting credit, the terms it's granted on and
recovering this credit when it's due. This is the function within a bank or company to
control credit policies that will improve revenues and reduce financial risks.

2
1.2 Background of the Study
Bank is committed to provide high quality financial services/products 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. In achieving the aforesaid
objectives of the Bank, Credit Operation of the bank is of paramount importance as the
greatest share of total revenue of the Bank is generated from it, maximum risk is centered
in it and even the very existence of bank depends on prudent management of its credit
portfolio. The failure of a commercial bank is usually associated with the problem in
credit portfolio and it’s less often the result of shrinkage in the value of other assets. As
such, credit portfolio not only features dominant in the assets structure of the bank, rather
it is crucial to the success of the bank also.
Even though one of the major causes of serious banking problems continues to be the
ineffective credit risk management, the provision of credit remains the primary
business of every bank in the World. For this reason, credit quality is considered a
primary indicator of financial soundness and health of banks. Interests that are charged on
loans and advances form sizeable part of banks’ assets. Default of loans and advances
poses serious setbacks not only for borrowers and lenders but also to the entire economy
of a country.
Increasing level of non-performing loan rates in banks’ books, poor loan processing, and
undue interference in the loan granting process, inadequate or absence of loan collaterals
among other things are linked with poor and ineffective credit risk management that
puts a negative impact on banks profitability. As a result, there is a huge likelihood of
widespread impact on the economy in connection with banks failure, so the management
of credit risk is a topic of great importance since the core activity of every bank is credit
financing. However, the most vital of all risks is the credit risk and therefore, it demands
special attention and treatment.

3
1.3 Origin of the Study
Bachelor of Business Administration (BBA) degree requires a three months attachment
with an organization followed by a report assigned by the faculty supervisor. I got the
opportunity to do my internship in Bangladesh Commerce Bank Limited at A.K Khan
Branch, Chattagram. I have conducted my study on “Credit Risk Management of
Bangladesh Commerce Bank Limited”. My faculty supervisor Dr. Rajib Chakraborty,
Assistant Professor of Port City International University, also approved the topic and
authorized me to prepare this report as part of the fulfillment of internship requirement
and gaveme proper guidance and assistance over time.
Credit risk management is a common issue of concern among financial institutions all
around the globe. A study conducted on credit risk management techniques of
contemporary financial institutions is sure to benefit all of us. Therefore, the study has
been timely and worthwhile.

The Internship Report is prepared at an organization that helps to understand both

theoretical and practical knowledge. So the knowledge and experience I have gained
from working with selected companies has helped me to work on Bangladesh Commerce
Bank Ltd "Credit Risk Management" topic. Credit risk management is a common issue of
concern among financial institutions all around the globe. A study conducted on credit
risk management techniques of contemporary financial institutions is sure to benefit all of
us. Therefore, the study has been timely and worthwhile.

1.3 Objectives of the Study

The Objectives of the study are shown as under:
 To provide an overview of Bangladesh Commerce Bank Ltd.
 To know about Credit Management of Bangladesh Commerce Bank Ltd.
 To analyze the Procedure of Credit Risk Management of Bangladesh Commerce
Bank Ltd.
 To demonstrate findings, recommendations and conclusion.

4
1.4 Methodology of the Study
Methodology refers to the essential part of the study and the process of collecting
information and arranging it in terms of the relevant issues of the study. It is designed in a
way so that it correspondent to achieve the objectives of the study. The data needed for
conducting the study have been collected from the primary sources as well as secondary
sources.
Primary sources:
 Face to Face conversation with the respective officers and staffs.
 Interview with the Clients.
 Practical desk task.
 Direct observation.
 Relevant documents studied as provided by the officers concerned.
Secondary Sources:
 Annual Report of BCBL.
 Bangladesh Commerce Bank training material and officer's guidebook.
 Periodicals, Bulletins, Circular.
 General Reports.
 Monthly transaction record of the bank.
 Banks financial statement.
 Official Website of BCBL.

1.5 Statement of the problem

The decision to over-extend credit to high-risk customers may increase short-term
profitability for individual banks, though in aggregate, this lending behavior was seen to
become a major challenge to the risk management structures of the economy as a whole.
With the global financial crisis still recent, credit risk management is still the focus of
intense regulatory scrutiny. While stricter credit requirements as a “top-down” approach
have helped mitigate some economic risk, it has left many companies struggling to
overhaul their approach to credit risk assessment. In the scramble to implement risk

5
strategies to improve overall performance and secure a competitive advantage, a bank
must overcome significant credit risk management challenges, such as:
 Inefficient data management.
 No group wide risk modeling framework.
 Constant rework.
 Insufficient risk tools.
 Cumbersome reporting.

1.6 Scope of the Study

This study mainly emphasizes on the sequential activities involved in credit approval
process, analytical techniques used by Bangladesh Commerce Bank Ltd. for credit
analysis as an integral part of the credit approval process. This study also focuses on the
loan risk management techniques adopted by Bangladesh Commerce Bank Ltd in pre-
sanction and post-sanction period of a credit.

1.7 Limitations of the Study

From the beginning to end, the study has been conducted with the intention of
making it as a complete and truthful one. However, many problems appeared in the
way of conducting the study. The study considers following limitations:
 Lack of Collecting Elaborate Data due to Bank’s privacy.

 The time period for this study was short.

 Another limitation of this report is Bank’s policy of not disclosing some data and
information.
 Due to the unavailability of information in annual reports, our sample only
contains dataof 5 years’ annual reports from 2016 to 2020 respectively.

6
 Chapter Two
Overview of Bangladesh
Commerce Bank Ltd

7
2.1 Overview of Bangladesh Commerce Bank Ltd
Bangladesh Commerce Bank Limited (BCBL) a private sector commercial bank and
incorporated in Bangladesh on 1 June 1998 under the Banking Company Act, 1994. It
started banking operations on 16 September 1999 with an authorized and paid up capital
of Tk. 2,000 million and Tk. 920 million respectively. The share of the government of
Bangladesh in the bank's paid up capital is Tk. 300 million while depositors of the former
Bangladesh Commerce and Investment Limited (BCIL) contributed Tk. 520 million. The
balance of Tk. 100 million is to be subscribed by banks and financial institutions under
guidance and supervision by Bangladesh Bank.
The former Bangladesh Commerce and Investment Limited was set up on 27 January
1986 as a non-bank financial institution. It continued its business till April 1992.
Consequent upon its liquidity crisis, Bangladesh Bank suspended its operations in April
1992. As a result, the investors of the company suffered a lot and its employees became
jobless. Both the depositors and the jobless employees launched a movement for
reopening the company in some form or other and demanded return of their money and
dues. With a view to safeguarding the interest of the depositors, employees and the
general public, and to protecting the banking system itself from contagious effects of
bank failures, the government of Bangladesh established the Bangladesh Commerce
Bank on the ashes of the collapsed BCIL.
Subsequently, the government on 8 February 1998 constituted a 10-member board of
directors to organize and transform BCIL into BCBL and to administer the affairs of the
bank. The 24 branches of BCIL were reopened as full-fledged branches of BCBL. The
broad objective of the bank is to carry out all kinds of commercial banking activities and
to respond quickly to the changing demands for modern banking products.
To augment its deposit collection further, BCBL introduced a number of deposit schemes
suited to the needs of all classes of people in society. These schemes include: Monthly
Profit Based Deposit Scheme; Pension Saving Scheme; Interest Free Deposit and Loan
Scheme; Consumers' Credit Scheme; and Money Plantation against Saving Certificates.

8
2.2 Vision
To become a Bank of first choice by the customers with meaningful contributions to the
society.

2.3 Mission
Bangladesh Commerce Bank Ltd. is committed to fulfill its customer needs and become
their first choice in banking so that a sustainable growth, reasonable return and
contribution to the development of the country can be ensured with a motivated and
professional work force.

2.4 Strategic Priorities

 To maintain a healthy growth of business in all core activities with desired
image.
 To acquire state-of –the art technologies and adopt innovative ideas for
financial inclusion.
 To strengthen the risk management technique and compliance culture.
 To expand the customer base and maintain an incremental deposit & reduce
the non-performing assets.
 To develop appropriate corporate governance system and culture with best
practice.
 To establish relationship banking & continuously improve service quality.
 To extend banking services to all classes of people.
 To ensure environment friendly investment in line with the “Green Banking
Guideline” issued by Bangladesh Bank.
 To take effective measures to increase capital base and provision shortfall.
 To enrich management capacity & human resources quality and develop a
pro-active work force with a suitable compensation package.
 To be a trend-setter in the socio-economic development of the country.
 To encourage and broaden the base of investments.
 To provide for good profit and sound growth.

9
2.5 Legal Status
A public limited company incorporated in Bangladesh on June 01, 1998 under the
Companies Act 1994, the Bank Company Act 1991 and Act 12 of 1997.

2.6 Core Business

Bangladesh Commerce Bank Limited is known as a commercial bank. Like all
commercial banks BCBL’s core business is obtaining deposit and providing loans. It is a
financial institution providing services for businesses, organizations and individuals.
Service includes offering different types of deposit account such as current deposit
accounts, saving deposit accounts and other scheme accounts as well as giving out loans
to businesses and individuals.
BCBL make its profit by taking small, short-term, relatively liquid deposits and
transforming these into small, medium, larger loans for short, medium and longer
maturity loans. These processes of asset transformation generate net income for BCBL.
BCBL also does investment banking though it is not considered its main business area.
However, BCBL is primarily engaged in deposit and lending activities to private and
corporate clients in wholesale and retail banking. Other services typically include credit
cards, mobile banking, custodial service and guarantees, cash management and settlement
as well as trade finance.
Authorized Capital BDT 10,000 Million
Paid up Capital BDT 1,989 Million
Face Value per Share BDT 100 per share
Company Registration C-35510(2286)/98
Number
Bangladesh Bank BRPD(P)744(KHA)/99-2842
License Number
Registered Head Office Eunoos Trade Center (Level-22),
52-53 Dilkusha C/A, Dhaka –
1000, PABX: 9559831,Fax:
9568218

10
2.7 Subsidiary Organizations
Commerce Bank Securities and Investment Limited (CBSIL) emerged as a fully owned
subsidiary of Bangladesh Commerce Bank Limited (BCBL) after it had obtained its
certificate of incorporation on the 20th September, 2010. On the 21st April, 2011, the
Stock Broker and Stock Dealer license was transferred in favor of CBSIL and after the
completion of necessary formalities; the company started its formal operation on the 1st
June, 2011.
Commerce Bank Securities and Investment Limited having its legal status as a Public
Limited Company was registered with the Registrar of Joint Stock Companies and Firms
in Dhaka with an Authorized Capital and Paid up Capital of Tk. 100.00 crore and Tk.
20.00 crore respectively. The company is being operated in accordance with its
Memorandum of Association (MA) and Articles of Association (AA), rules and
regulations of Bangladesh Securities and Exchange Commission (BSEC) and Dhaka
Stock Exchange (DSE) and other applicable laws and guidelines of appropriate
regulatory bodies in Bangladesh.
Commerce Bank Securities and Investment Limited started its journey with mission of
“To provide world class investment services that adds value to all out stakeholders”.
CBSIL is running their operation to be one of the top performers in the sector through
achieving the following:
 Sound and prudent portfolio management to earn maximum return on
investment
 Transparency and accountability in service delivery
 Establishing and maintaining effective customer relationship
 Minimizing loan defaults within the customer portfolio through optimal loan
utilization
 To earn high return on equity
 To comply with international best practice in business dealings.

11
2.8 Services of CBISL
 Stock brokerage service
 CDBL related service
 Daily market update & pre-market commentary
 Weekly/Monthly market update
 Quarterly economic update
 Company/Industry specific research
 IPO analysis
 Technical & Fundamental analysis
 Loan facilities for client as per SEC Margin Rules provided from time to time
 Trading facilities from 6 different locations of the country
 Trading based on large projector screen.- Maintain highest degree of
professionalism & business ethics
 Privilege for the high network individual to trade in exclusive privacy
 Special facilities arranging for female clients
 Telephonic trading facilities
 e-mail service

2.9 Branches of BCBL

Branches by Districts

1 Barishal 7 Feni 13 Moulvibazar

2 Bogura 8 Gazipur 14 Mymensingh
3 Chattogram 9 Jessore 15 Naogaon
4 Cumilla 10 Khulna 16 Narayanganj
5 Dhaka 11 Lakshmipur 17 Sylhet
6 Dinajpur 12 Madaripur 18 Tangail

12
2.10 BCBL Training Institute
Training is very important for employee’s performance in acquiring competencies and
help organization to retain its employees through satisfaction and motivation. Globally
day by day the world is modernizing and moving rapidly which is creating many
challenges for the organizations. Training can overcome and make an employee’s
capabilities more efficient which also contributes in the efficiency of the company.
Bangladesh Commerce Bank training institute since its establishment in 1988 is playing a
significant role in enhancing the capabilities of Human Resources to face the challenges
of globalization as well as to carry out the day to day business operations smoothly,
efficiently and promptly. BCBL training institute is fully equipped with a professional
library, modern training aids and professional faculties. Library has different books on
banking, economy, accounting, management, marketing and other related subjects. Main
training activities consists of in-depth foundation programs for entry level
Trainees. Specialized training programs in the areas like general banking, advance,
foreign exchange, information technology, marketing and accounts etc. are also
organized by the Academy depending on need. Frequently outreach programs are also
organized to meet the demand for new and specialized skills. Since its inception academy
has not only conducted courses, workshops and seminars as required by the Bank.
The academy also re-design its courses, programs etc, regularly to meet the requirement
of new skills arising out of various directives, guidelines of the Central Bank and
significant changes in the banking sector from time to time.
BCBL training institute arranges time to time different workshop that encourages the
learning, thinking and creativity. Workshops areas: Green Banking, CTR & STR system,
IRG for Investment, General Banking operation, Investment Classification, Provisioning
system & re-scheduling, Leadership in banks, SME, ALM, Behavior & Work
Environment, Corporate governance, Cash management, CRM, Executive development
programs, CL-CIB, SBS 1, 2 & 3, Ethics in Banking, Etiquette & Manner in banks, E-
learning, E-commerce, E-banking, HRM ICT related & others.

13
2.11 BCBL Products
Retail Banking
 Deposit Schemes
 Loans & Advances
 BCBL Debit Card
 BCBL Credit Card
 Utility Bill Pay Services
 Sure cash
 Locker Services
Corporate Banking
 General Loan
 Export Financing
 Import Financing
 Syndicate Financing
 Trade Financing
 Working Capital Financing
SME and Agriculture Banking
 SME Products
 Agro Products
NRB Services
 Foreign Remittance
 Account Facilities for NRBs
 Bank Overseas Networks
 Rules for Opening & operating FC account
Digital Banking
 Internet Banking

14
  SMS Alert Service
 BCBL Debit Card
 BCBL Credit Card
 E-GP Service
 E-payment
 Online Utility Bill
 Automated Challan System
 T&T Bill Collection
 PDB Electricity Bill
 DESCO Bill Collection
 Rural Electricity Board (REB) Bill Collection
Islamic Banking products

 BCBL offers affordable financing at reasonable rates.

 BCBL offers credit limit to finance current assets and working finance and long
term loan to finance fixed assets, capital machinery etc.
 BCBL also finances Real Estate, Work order, Foreign Trade.

Consumer Credit Products

 Household Durable Loan
 Car Loan
 Doctors Loan
 Advance Against Salary
 Any Purpose Loan
 Education Loan
 Travel Loan
 Marriage Loan
 CNG Conversion Loan

15
2.12 Organization Structure

16
 Chapter Three
Theoretical Aspects of Credit
Risk Management

17
3.1 Introduction
In all business dealings, officers and employees must be guided by the principles or
honesty and integrity and safeguard the interest of the share holders and the depositors
of the bank. They should strictly adhere to the banking laws, rules and regulations of
the govt. of Bangladesh and the instructions issued by the Bangladesh bank from time
to time that affect the business practice of the bank.
The formulating a credit judgment and making quality Credit decisions, the lending
officers must be equipped with all information needed to evaluate a borrower’s
character, management competence and capacity, capital, ability to provide collaterals
and external conditions which may affect in meeting financial obligations.
3.1.1 Credit
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a
lenders 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.
3.1.2 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.
3.1.3 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.

18
3.1.5 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.
3.1.6 Factors related with Loans and Advances
 Risk
 Time
 Interest/ Profit rate
 Security or Collateral
 Legal Considerations
 Inflation etc.

3.1.7 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.

3.1.8 Functions of Credit Division

Money lending is one of the main functions of a commercial bank. In the lending
process, selection of borrower is the most crucial and vital job for a banker. Before a
customer enjoys credit facilities it is important that the applicant should qualify for
five Cs. The five Cs are:
Character – Intention to pay back the loan
Capacity – Borrowers competence in terms of utilizing the fund profitably and
generate income
Capital –Financial strength to Lending cover the risk

19
 Conditions – General business condition between two parties
Collateral – Implies additional securities
In addition, objectives of the credit department are managing credit exposure of the
bank, maintaining credit risk, compliance of Central Bank Ltd, recovering or
collecting dues of retail loans or advances. At present credit division performs
following activities:
Dealing with Corporate & Retail Credit
Perform Collection and Monitoring Activity
Support Recovery & Risk Management
Besides this, the activities of this department include managing the financial books of
the bank, checking all entries of the book are according to United Commercials,
preparing daily reports for Bangladesh Bank, revenue appropriation and calculations,
setting the internal pricing rates etc.

3.2 Different Types of Credit Facilities

There are different types of credit facilities offered by bank from which some of the
explain below:
Overdraft
The word overdraft means the act of overdrawing from the Bank account. In other
words, the account holder withdraws more money from the Current Account than has
been deposited in it. The loan holder can freely draw money from this account up to
the limit and can deposit money in the account. The Overdraft loan has an expiry date
after which renewal or enhancement is necessary for enjoying such facility. Any
deposit in the overdraft account is treated as repayment of loan. Interest is charged as
balance outstanding on quarterly basis. Overdraft facilities are generally granted to
businessmen.
Bill Discounting
Under this type of lending, Bank takes the bill drawn by borrower on his (borrower's)
customer and pays him immediately deducting some amount as discount/commission.
The Bank then presents the Bill to the borrower's customer on the due date of the Bill
and collectsthe total amount. If the bill is delayed, the borrower or his customer pays
the Bank a pre- determined interest depending upon the terms of transaction.

20
Term Loan
This type Banks lend money in this mode when the repayment is sought to be made
in fixed,pre-determined installments. These are the loans sanctioned for repayment
in period more than one year. This type of loan is normally given to the borrowers for
acquiring long term assets.
Short Term loan
Term loan extended for short period usually up to One year is term as STL. This type
of loan may or may not have specific repayment schedule. However STL with
repayment schedule is preferable. Suppose, Short Term Agricultural Loan and Micro
Credit are enlisted by Agricultural Credit division of Bangladesh Bank in its „annual
loan program‟. Loans disbursed in agricultural sector for a period not more than 12
months are also included in this category. Short term micro credits are the credits not
exceeding BDT 25,000/- (taka twenty five thousand) only and repayable within twelve
months.
Lease Finance
These types of finance are made to acquire the assets selected by the borrower (lessee)
for hiring of the same at a certain agreed terms and conditions with the bank (lessor).
In this case bank retains ownership of the assets and borrower possesses and uses the
same on payment ofrental as per contract. In this case no down payment is required
and usually purchase optionis not permitted.
Letter of Credit (L/C)
This is a pre-import finance which is made in the form of commitment on behalf of
the client to pay an agreed sum of money to the beneficiary of the L/C upon
fulfillment of terms and conditions of the credit. Thus at this stage bank does not
directly assume any liability, as suchthe same is termed as contingent liability.
Retail
Retail loans are given for personal usage rather than for business purposes. It includes
autoloan, personal loan, home loan and vacation loan.
Corporate
Any loan exceeding 1,00,00,000 BDT and issued for business and trade purposes is
defined as corporate loan. Such loans mainly serve the purpose of initials for the

21
establishment of industry or large scale factory.
Bank Guarantee
Bank Guarantee is one sort of non funded facility. Bank Guarantee is an irrevocable
obligation of a bank to pay a pre-agreed amount of money to a third party on behalf of
a customer of a bank. A contract of guarantee is thus secondary contract, the principal
contract being between the beneficiary / creditor and the principal / principal debtor
themselves to which guarantor is not a part. If the promise or the liability in the
principal contract is not fulfilled or discharged, only then the liability of guarantor or
surety arises.
Syndicated Loan
These are the loans usually involving huge amount of credit and such to reduce a
particular bank’s stake. A number of banks / financial institutions participate in such
credit, known asloan syndication. The bank primarily approached / arranging the credit
is known as the leador managing bank.
SME (Small & Medium Enterprise) Loans
This type of loan is disbursed for business purposes but the amount loaned does not
exceed 1,00,00,000 BDT. The amount loaned here serves the purpose of potential
(partial) workingcapital for small and medium business ventures.

3.3 Types of Credit Risk

Credit risk is classified within the following manner
Credit default risk: The loss of arising from an individual being unlikely to pay
its loan obligation fully or the individual is over ninety days late on any material
credit obligation. Default risk could impact all credit sensitive dealing, together
with loans, securities and derivatives.
Concentration Risk: The risk go with any single exposure or cluster of exposure
with the potential to provide giant enough losses to threaten a bank’s core
operation. It’s could arises within the variety of single name concentration
or business concentration.
Country Risk: The risk arises from sovereign state freezing foreign currency payment
or when its default on its obligations.

22
3.4 Overall Procedure for Sanctioning Loan
The following procedure need to be followed for giving advances to the customer.
 Party’s application
 Filling form-A
 Collecting CIB report from Bangladesh Bank
 Processing loan proposal
 Project appraisal
 Head office approval
 Sanction letter
 Documentation
 Disbursement

Party‟s application
At first borrower had to submit an application to the respective branch for loan, where
he/she has to clearly specify the reason for loan. After receiving the application form
the borrower Bank officer verifies all the information carefully. He also checks the
account maintains by the borrower with the Bank. If the official becomes satisfied
then he gives form-A (prescribed application form of Bank) to the prospective
borrower.
Filling Form -A
After satisfying with party’s application the applicant need to fill Form-A. It is the
prescribed form provides by the respective branch that contains information of the
borrower. It contains- Name with its factory location, Official address and telephone
number, details of past and present business, its achievement and failures, type of loan
needed etc.
Collecting CIB Report from Bangladesh Bank
After receiving the application for advance, Bank sends a letter to Bangladesh Bank
for obtaining a report from there. This report is called CIB (Credit Information
Bureau) report. Bank generally seeks this report from the head office for all kinds of
investment. The purposeof this report is to being informed that whether the borrower
has taken loan from any other Bank; if yes then whether the party has any overdue
amount or not.
23
Processing loan Proposal
After receiving CIB report from Bangladesh Bank, then respective branch prepare an
Investment proposal, which contains terms and conditions of Investment for approval
of Head Office. Documents those are necessary for sending Investment proposal are:
Necessary Documents
While advancing money, banks create a lot of documents, which are required to be
signed by the borrowers before the disbursement of the loan. Of them some are
technically called charge documents. Necessary steps and documents:
 Loan application form duly signed by the customer.
 Acceptance of the term and conditions of sanction advice.
 Trade license.
 In Case Of Partnership Firm, copy of registered partnership deed duly certified
as true copy or a partnership deed on non-judicial stamp of taka-150
denomination duly notarized.
 In Case Of Limited Company
 Copy of memorandum and articles of association of the company
including certificate of incorporation duly certified by Registered Joint
Stock Companies (RJSC) and attested by the managing director and
accompanied by an up-to- date list of directors.
 Copy of board resolution of the company for availing credit facilities
and authorizing managing director/chairman/director for execution of
documents and operation of the accounts.
 Copy of last audited financial statement up to last 3 years.
 Personal guarantee of the directors including the chairman and
managingdirector.
 Certificate of registration of charges over the fixed and floating assets of
the company duly issued by RJSC.
 Certificate of registration of amendment of charges over the fixed and
floating assets of the company duly issued by RJSC in case of repeat
loan or change in terms and conditions of sanction advice regarding loan
amount and securities etc.

24
  Demand promissory notes.
 Letter of hypothecation of stocks and goods.
 Letter of hypothecation of books debts and receivable.
 Letter of hypothecation of plant and machinery.
 Personal letter of guarantee.

Project Appraisal
It is the pre-investment analysis. Project appraisal in the Banking sector is important
for thefollowing reasons:
 To achieve organizational goals
 To recommend if the project is not designed properly
 To justify the soundness of an investment
 To ensure repayment of Bank finance

Techniques of Project Appraisal

An appraisal is a systematic exercise to establish that the proposed project is a viable
preposition. Appraising officer checks the various information submitted by the
promoter in first information sheet, application for Investment and Investment
proposal. The Head Office (HO) mainly checks the technical, commercial and
financial viability of the project. For others, HO is dependent on branch’s information.
But when the investment size is big, then the HO verifies the authenticity of
information physically.
Approval Process
The approval process must reinforce the segregation of Relationship
Management/Marketing from the approving authority. The responsibility for preparing
the Credit Application should rest with the RM within the corporate/commercial
banking department. Credit Applications should be recommended for approval by the
RM team and forwarded to the approval team within CRM and approved by individual
executives. Banks may wish to establish various thresholds, above which, the
recommendation of the Head of Corporate/Commercial Banking is required prior to
onward recommendation to CRM for approval. In addition, banks may wish to
establish regional credit centers within the approval team to handle routine approvals.
Executives in head office CRM should approve all large loans. The recommending or

25
approving executives should take responsibility for and be held accountable for their
recommendations or approval. Delegation of approval limits should be such that all
proposalswhere the facilities are up to 15% of the bank’s capital should be approved at
the CRM level, facilities up to 25% of capital should be approved by CEO/MD, with
proposals in excess of 25% of capital to be approved by the EC/Board only after
recommendation of CRM, Corporate Banking and MD/CEO.
Sanction Letter
After getting the approval of the HO the branch issues sanction letter to the borrower.
A sanction letter contains:
 Name of borrower,
 Facility allowed,
 Purpose,
 Rate of interest,
 Period of the Investment and mode of adjustment,
 Security and Other terms and condition.

Documentation
If the borrower accepts the sanction letter, the Documentation starts. Documentation is
a written statement of fact evidencing certain transactions covering the legal aspects
duly signed by the authorized persons having the legal status. The most common
documents used by the United Commercial Bank for sanctioning different kinds of
Investment are:
 Joint Promissory Note,
 Letter of Arrangement,
 Letter of Disbursement,
 Letter of Installment,
 Letter of Continuity,
 Trust Receipt,
 Counter Guarantee,
 Stock Report,
 Letter of Lien,
 Status Report,

26
  Letter of Hypothecation,
 Letter of Guarantee
 Documents Relating to Mortgage.

Disbursement
After sanction and completion of all formalities the respective officer disburses the
loan. The officer writes cheque and provides it to the borrower. For this borrower has
to open an account through which he/she can withdraw the money
Strategies for Recovery: Recovery of loan can be made in the following three methods:
 Persuasive Recovery: The first step in recovery procedure is private
communication that creates a mental pressure on borrower to repay the loan. In
this situation bank can provide some advice to the borrower for repaying the
loan.
 Voluntarily: In this method, some steps are followed for recovering loan. These are:
(i) Building Task Force
(ii) Arranging Seminar
(iii) Loan Rescheduling Policy
(iv) Waiver of Interest Rate
 Legal Recovery: When all steps fail to keep an account regular and the
borrower does not pay the installments and interests then the bank take
necessary legal steps against the borrower for realization of its dues. In this
case “Artha Rin Adalat Law 2003” plays an important role for collecting the
loan.

3.5 Credit Administration

The administration function is critical in ensuring that proper documentation and
approvals are in place prior to the disbursement of loan facilities. For this reason it is
essential that the function credit administration be strictly segregated from
relationship management/ marketing in order the possibility of controls being
compromised of issues not being highlighted at the appropriate level.
3.5.1 Credit Evaluation Principles:
Some principles or standards of lending are maintained in approving loans in order to
keep credit risk to a minimum level as well as for successful banking business.

27
The main principles of lending are given below:
Liquidity: Liquidity means the availability of bank funds on short notice.
Therefore, the banks must have to maintain sufficient liquidity to repay its
depositors and trade off between the liquidity and profitability is must
Safety: safety means the assurance of repayment of distributed loans. Bank is in
business to make money but safety should never be sacrificed for profitability, to
safety of loan. The borrower should be chosen carefully. He should be a person of
good character & capacity as well as bank must have to maintain eligible number of
security from borrower.
Profitability: Banking is a business aiming at earning a good profit. The difference
betweenthe interest received on advances and the interest paid on deposit constitutes
a major portion of the bank income, besides, foreign exchange business is also highly
remunerative. The bank will not enter into a transaction unless a fair return from it is
assets.
3.5.2 Credit policies
The bank formulates its own credit policy keeping it flexible to accommodate
changes that are taking place. In line with the policy guideline issued by the Central
bank from time to time, at present, several credit schemas are on the offer, which
received quit well response from the customers and may help the bank to expand its
customer base. The bank also engaging in syndication with other banks for allowing
large loans converging Bangladesh banks rules and regulation.
Policy Guidelines
This section details fundamental credit risk management policies that are
recommended for adoption by all banks in Bangladesh. The guidelines contained
herein outline general principles that are designed to govern the implementation of
more detailed lending procedures and risk grading systems within individual banks.
Lending Guidelines:
All banks should have established Credit Policies (“Lending Guidelines”) that clearly
outline the senior management’s view of business development priorities and the
terms and conditions that should be adhered to in order for loans to be approved. The
Lending Guidelines should be updated at least annually to reflect changes in the

28
economic outlook andthe evolution of the bank’s loan portfolio, and be distributed to
all lending/marketing officers. The Lending Guidelines should be approved by the
Managing Director/CEO & Board of Directors of the bank based on the endorsement
of the banks Head of Credit Risk Management and the Head of Corporate/Commercial
Banking. Any departure or deviation from the Lending Guidelines should be explicitly
identified in credit applications and a justification for approval provided. Approval of
loans that do not comply with Lending Guidelines should be restricted to the bank‟s
Head of Credit or Managing Director/CEO & Board of Directors. The Lending
Guidelines should provide the key foundations for account officers/relationship
managers (RM) to formulate their recommendations for approval, and should include
the following:
Credit Management Strategies
Making advances is the primary function of a bank. A major portion of its funds is
used for this purpose and this is also the major sources of banks income. Loans are
the right to receive payment or an obligation to make payment on demand or at some
future time on account of the immediate transfer of goods (securities). Loans are the
largest asset item, which generally account for half to almost three-quarters of the total
value of all banks assets. A banks loan account typically is broken down into several
groups of similar type loans.
The Loan and Advances made by the bank can broadly be classified by following
Categories-
1. Continuous Loan
2. Demand Loan
3. Term Loan
4. Other Special Scheme
Steps Involved to Sanctioning a Loan
1. The applicant needs to apply in prescribed application such as „Form A‟
2. Then (3) three additional form to be filled up.
 Inquiry form-CIB 1A (Provides such information as amount for fresh
loan orrenews the loan.)
 Inquiry form- CIB 2A (If the applicant is an institution; all the

29
 information tobe provided by the owner)
 The inquiry form CIB-3A (Seeks the applicant to supply information of
groupor related business concern)
3. Then the applicant gives a list of assets which can be kept as collateral. The
applicant will declare in faith that such assets offered as collateral are owned by
the business owner and are not already kept as collateral to other financial
institution against any sanction of loan or credit limit.
4. Then the bank makes the valuation of fixed assets (to be kept as collateral) to
be assessed and valued by independent inspection services. The inspection
company submits the survey report and provides an independent valuation of
the assets that were offered as collateral.
5. Then the bank will perform a lending risk analysis or LTA. The LRA is a kind
of assessment where some scoring is made on various risks to which the
applicants business or project is exposed. The scoring result is arriving at the
level of risks of thebusiness or project. A detailed discussion or LRA is made
later.
6. After the lending risk analysis net worth is calculated by subtracting total
liabilities from total assets. This net worth is calculated both for the
organization and for the individuals including the Managing Directors and
Directors.
7. A prescribed form „Form B‟ is to be filled in by case of proposal for loans and
advances for individuals, proprietorship, partnership limited company(private
or public), other banks loan proposal acceptance certificates. If the applicant
has received any sanction of loan or advance from other banks a certificate
showing such acceptance of loan proposed must be submitted.

3.6 Disbursement
The loan administration department performs the following responsibilities inconnection
with the disbursement to ensure that:
 All standard security and charge documents are in place.
 Documentation check list has been prepared.
 Credit administration department has duly authorized the disbursement.

30
  A proper back up of all the documents is maintained in the computer system.
 A proper back up of all the documents is maintained in the computer system.
 Incomplete documentation has received temporary waiver from the authority.
 Pricing of the facility is appropriate.
 All disbursements / drawings are in the form of approved credit facility.
 Excess over limit are allowed under pre-fact approval.
 A clean updated CIB report is obtained before disbursement.
 The lending cap of the bank is duly maintained.
3.6.1 Credit Monitoring
To minimize credit losses, monitoring procedures and systems shall be in place that
provides an early indication of the deteriorating financial health of a borrower. At a
minimum, systems shall be in place to report the following exceptions to relevant
executives in CRM and RM team:
 Past due principal or interest payments, past due trade bills, account excesses,
and breach of loan covenants.
 Loan terms and conditions are monitored, financial statements are received on
regular basis, and any covenant braches or exceptions are referred to CRG and
the RM team for timely follow-up.
 Timely corrective action is taken to address finding of internal, external or
regulator inspection/audit.
 All borrower relationships/loan facilities are reviewed and approved through
thesubmission of a credit proposal at least annually.

3.7 Credit Recovery

The collection process for personal loans starts when the account holder has failed
to meetone or more contractual payment (Installment). It therefore becomes the duty
of the Collection Department to minimize the outstanding delinquent receivable and
credit losses. This procedure has been designed to enable the collection staff to
systematically recover the dues and identify / prevent potential losses, while
maintaining a high standard of service and retaining good relations with the
customers. It is therefore essential and critical, that collection people are familiar with
the computerized system, procedures and maintain effective liaison with other

31
departments within the bank (Prudential regulations for consumer financing 2004,
Bangladesh Bank)
3.7.1 Credit Recovery functions
The credit division performs the following recovery related functions:
a) Directly managing accounts with sustained deterioration (a risk rating of
substandard orWorse)
b) Determining work out plan / Recovery strategy.
c) Pursuing all avenues to maximize recovery, including placing customers into
receivershipor liquidation as appropriate.
d) Ensuring adequate and timely loan loss provisions are made based on actual and
expectedlosses.
e) Keeping top management appraised of grade 6 or wore accounts.
3.7.2 Recovery Steps
1. Contact by Original Credit:
When payments on loan or credit account, creditor may contact through the mail or
call attempt to collect the payments. These actions may continue for 30 to 60 days
after first delinquency according to the Discover Devt Freedom website. Creditor may
also report delinquency to all three major credit-reporting bureaus during this time. If
creditor is unsuccessful in obtaining payments needed to bring account current,
creditor may sell debtor account to a debt collection agency. This action can further
damage credit score.
2. Confirmation of Debt:
A debt collector must first confirm the contact information he has for the debtor is
accurate and that the debt is bailed. The collector usually attempts to confirm the
debt by contactingthe debtor either through the mail or over the phone.
3. Collection Calls:
The debt collection agency usually begins collection calls once it confirms that the debt
is valid. These collection calls are made in an attempt to contact the debtor and secure
paymentfor the debt or arrange a payment plan that can pay off the debt over time.

32
 Chapter Four
Performance Analysis of
Bangladesh Commerce Bank Ltd

33
4.1 Financial Analysis
Financial analysis is the process of analyzing a company's/ bank’s financial statements
for decision-making purposes. External stakeholders use it to understand the overall
health of an organization as well as to evaluate financial performance and business value.
It provides internal and external stakeholders with the opportunity to make informed
decisions regarding investing. Financial analysis also provides lending institutions with
an unbiased view of a business's financial health, which is helpful for making lending
decisions.

34
4.1.1 Performance of Loans and Advances
Loans refer to a debt provided by a bank or a financial institution for a particular period
while Advances are the funds provided by the banks to the business to fulfill working
capital requirement which are to be payable within one year.
Loans and Advances for last five years
BDT in Million
Year 2016 2017 2018 2019 2020
Loans and 16334 19284 22148 20476 19080
Advances

Loans and Advances

25000

20000

15000

10000 Loans and Advances

5000

0
2016 2017 2018 2019 2020

Analysis
The Loans and Advances of Bangladesh Commerce Bank Limited reflects that almost
every years Loans and Advances have increased from the previous year.
Like previous years, the loans and advances, banks sound and endless effort in credit
operation. Although there were ups and downs in the economic and political phenomena
in 2020, the accumulated loans and advances of the bank significantly and descended to
BDT 19080 million as on 31st December, 2020 compared to previously BDT 20476
million.

35
4.1.2 Total Deposits
Bank deposits consist of money placed into banking institutions for safekeeping. These
deposits are made to deposit accounts such as savings accounts, checking accounts, and
money market accounts. The account holder has the right to withdraw deposited funds, as
set forth in the terms and conditions governing the account agreement.
BDT in Million
Year 2016 2017 2018 2019 2020
Total 25223 30009 31633 30139 30093
Deposits

Total Deposits
35000

30000

25000

20000

15000 Total Deposits

10000

5000

0
2016 2017 2018 2019 2020

Analysis
Above the graph total deposit for 2016 were 25223 million and the trend of total deposit
increasing in 2017 & 2018. But in 2019 & 2020 total deposits is decreasing compare with
previous year. It is not good indication for the bank. It shows bad performance of Total
deposits.

36
4.1.3 Performance of Loans to Deposits ratio
BDT in Million
Year 2016 2017 2018 2019 2020
Total 16334 19284 22148 20476 19080
Loans
Total 25223 30009 31633 30139 30093
Deposits
Total 64.75% 64.26% 70.02% 67.93% 63.40%
loan/Total
deposit

72.00%

70.00%

68.00%

66.00%
Total loan/Total deposits
64.00%

62.00%

60.00%
2016 2017 2018 2019 2020

Analysis
Typically, the ideal credit deposit ratio is 80% to 90%. A loan-to-deposit ratio of 100%
means a bank loaned one taka to customers for every taka received in deposits it received.
It also means a bank will not have significant reserves available for expected or
unexpected contingencies. In 2016 credit deposit ratio is lowest 64.75%, in 2017 it is
64.26% which decreasing compare with the year 2016. In 2018 it is highest 70.02%. It
decreases again in 2019 and in 2020 it is lowest 63.40%.A low ratio indicates banks are
not making full use of their resources and the bank the may not be earning as much as it
could be.

37
4.1.4 Non performing Loan
A non-performing loan (NPL) is a bank loan that is subject to late repayment or is
unlikely to be repaid by the borrower in full. Non-performing loans represent a major
challenge for the banking sector, as it reduces the profitability of banks, and is often
presented as preventing banks from lending more to businesses and consumers, which in
turn slows down economic growth.
BDT in Million
Year 2016 2017 2018 2019 2020
Non performing 6255 5598 8583 11325 9770
Loan

Analysis
Non performing Loan is lowest in 2017 amount 5598 million compare with other years.
From 2018 it is increasing and in 2019 it is highest amount 11325 million. In 2020 it is
decreases. Non performing loan position is not good in 2019 if we compare with previous
year. Bank should aware about their Non performing loan.

38
4.1.5 NPL to Total Loans & Advances
An NPL ratio is used to measure the level of the bank's credit risk and quality of
outstanding loans. A high ratio means the bank bears a greater risk of loss if it fails to
recover the owed amounts, while a low ratio means that the outstanding loans pose a low
risk to the bank.
BDT in Million
Year 2016 2017 2018 2019 2020
NPL to Total 38.29% 29.03% 38.75% 55.30% 51.20%
Loans &
Advances

NPL to Total Loans & Advances

60.00%

50.00%

40.00%

30.00%
NPL to Total Loans & Advances
20.00%

10.00%

0.00%
2016 2017 2018 2019 2020

Analysis
NPL ratio is lowest in 2017 and it is highest in 2019 compare with other years. BCBL
NPL ratio is not good in position overall .A high ratio means that the bank is at a greater
risk of loss if it does not recover the owed loan amounts. Bank should aware about their
NPL ratio.

39
4.1.6 Net Interest Income
Net interest income is a financial performance measure that reflects the difference
between the revenue generated from a bank's interest-bearing assets and the expenses
associated with paying on its interest-bearing liabilities. A typical bank's assets consist of
all forms of personal and commercial loans, mortgages, and securities. The liabilities are
interest-bearing customer deposits. The excess revenue that is generated from the interest
earned on assets over the interest paid out on deposits is the net interest income.
BDT in Million
Year 2016 2017 2018 2019 2020
Net Interest 611 728 737 243 (758)
Income

Analysis
Net Interest Income position is good in 2017 and 2018 compare with other years. But in
2020 Net Interest Income position is negative. A negative net interest means that you
paid more interest on your loans than you received in interest on your investments. BCBL
should aware about net interest income.

40
4.1.7 Mode wise Trend of Loan in 2020
Loan Type BDT in Crore
Demand Loan 111.19
Loan General 565.04
Cash Credit(Hypo) 371.36
Agriculture Loan 98.68
Overdraft 494.36
SME Loan 216.56
Payment Against Document (PAD) 108.76
Loan against Trust Receipt (LTR) 174.95
House Building Loan 67.25
Credit Card 2.37
Consumer Credit 4.44
Staff Loan 43.85
Bill Purchase 2.31
Loans & Advances 46.85
Total 2307.97

4.44 43.85 2.31 46.85 111.19

2.37 Demand Loan
67.25
174.95
Loan General
108.76
Cash Credit(Hypo)
565.04
Agriculture Loan
216.56
Overdraft

SME Loan
371.36
494.36
Payment Against
Docoument(PAD)
Loan aginst Trust Receipt (LTR)
98.68

Analysis
The chart shows number of amounts of different types of loans in the bank. From the
chart we can understand that it finance utmost part of their fund in loan general and
secondly in overdraft.

41
 Chapter Five
Findings, Recommendations
& Conclusion

42
5.1 Findings
After analyzing the financial & overall performance of Bangladesh Commerce Bank
Limited some findings have been identified
 Although there were ups and downs in the economic and political phenomena in
2020, the accumulated loans and advances of the bank significantly descended in
2020 compared to previous year 2019.
 Total deposit increasing in 2017 & 2018 compare with previous year 2016. But in
2019 & 2020 total deposits is decreasing compare with previous year. It is not
good indication for the bank. It shows bad performance of Total deposits.
 In 2016 loan deposit ratio is lowest 64.75%, in 2017 it is 64.26% which decreasing
compare with the year 2016. In 2018 it is highest 70.02%. It decreases again in
2019 and in 2020 it is lowest 63.40%.A low ratio indicates banks are not making
full use of their resources and the bank the may not be earning as much as it could
be.

 Non performing Loan is lowest in 2017 compare with other years. From 2018 it is
increasing and in 2019 it is highest. In 2020 it is decreases. Non performing loan
position is not good in 2019 if we compare with previous year. Bank should aware
about their Non performing loan.
 NPL ratio is lowest in 2017 and it is highest in 2019 compare with other years.
BCBL NPL ratio is not good in position overall .A high ratio means that the bank
is at a greater risk of loss if it does not recover the owed loan amounts. Bank
should aware about their NPL ratio.
 Net Interest Income position is good in 2017 and 2018 compare with other years.
But in 2020 Net Interest Income position is negative. A negative net interest
means that you paid more interest on your loans than you received in interest on
your investments. BCBL should aware about net interest income.

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5.2 Recommendations
The existing credit policy is good enough to run the bank. But as the competition is
increasing day by day the bank should take some measures so that they can distinguish it
from the others. The Credit Department of Bangladesh Commerce Bank Ltd. can follow
the following suggestions to improve their performance regarding credit management.
 BCBL should aware about loans and advances.
 BCBL should increase total deposits.
 Non performing loan position is not good in 2019 if we compare with previous
year. Bank should aware about their Non performing loan.
 BCBL net interest income is negative in 2020.BCBL should take necessary steps
about net interest income.
 The credit sanctioning procedure should be shortened so that valuable customers
willbe retained.
 For increasing the growth rate of Investment, bank should take effective schemes.
 BCBL may also promote its loan program through different advertising tools
i.e. TVads, News paper ads etc.
 The management of Bank can give permission to its branches to design or change
lending products on the basis of local demand or may consider recommendation
from branch level in designing or altering lending products.
 Bangladesh Commerce Bank Ltd should reduce the interest rate or other charges
to attract customer’s attention.
 Giving authority to the branch officials to take decisions about Loans and
Advances.
 A separate team is necessary to recover Loans and Advances in every branch.
 Bangladesh Commerce Bank Ltd. should always be concerned about the changes
taking place in industry and be pro active to take proper actions to adopt the
situation.

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5.3 Conclusion
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. Bangladesh Commerce Bank Limited is not different from them. Bangladesh
Commerce Bank 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 Bangladesh Commerce Bank Limited, A.K. Khan Branch. It presents me ample
opportunity to scrutinize the functions of bank through the superior assistance of its
members.
Bangladesh Commerce Bank Limited 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.
Doing outstanding performance and being the dominant among the industry in this cut
throat competitive situation depends not only on the internal strengths but also on the
external opportunities. Considering this efficient timely and updated corporate strategy
makes a way out for an organization to reach the desired position. BCBL is such a bank
which was able to grow its size in banking industry of Bangladesh through consistent
performance. Though BCBL has established image as one of the best service provider for
its potential customers; yet BCBL is not the market leader. The consistent performance of
the bank over the last few years is the evidence of the strengths of the bank, efficiency of
management team, and uphill struggle of employees. Despite the existence of
deficiencies in some areas, the overall performance of BCBL was outstanding among the
banking industry in Bangladesh. The bank has to overcome the shortcomings in the near
future and offer new innovative services in order to retain its position as a leader amongst
banks year after year.

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References
Reports
 Annual Report of Bangladesh Commerce Bank Ltd (2016-2020)
 Audit Report of Bangladesh Commerce Bank Ltd.
 BCBL prospectus and manual.
 Statement of Affairs of BCBL, A.K.Khan Branch.
 Reading Materials of basic training course for the probationary officers of
BCBL.
 Credit Risk Grading (CRG) Manual, Published by Bangladesh Bank.

Websites

 www.google.com
 www.wikipedia.com
 https://bcblbd.com/
 https://www.investopedia.com/

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