an overview of credit management by sonali bank limited.docx

7/23/2019 An Overview of Credit Management by Sonali Bank Limited.docx

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Letter of Endorsement

This is to certify that Ashikur Rahman is a student of Master of Business Administration (MBA) program,

ID: 11!1"#1##$, "%thIntake, Department of &inance Bang'adesh niersity of Business * Techno'ogy

(BBT), has successfu''y comp'eted his +Internship rogram- entit'ed +.redit Management of /ona'i

Bank 0imited- A study on a2na Branch under my superision as the partia' fu'fi''ment for the a3ard of

Master of Business Administration (MBA) degree 4e has done his 5o2 according to my superision and

guidance 4e has tried his 2est to do this successfu''y I think this program 3i'' he'p him in the future to

2ui'd up his career I 3ish him success and prosperity

66666666666666666666666666

Md Amin Mia

0ecturer

Department of &inance

Bang'adesh niersity of Business * Techno'ogy (BBT)

,


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PREFACE

roper education is re7uired for the harmonious dee'opment of 2ody, mind and sou' It is 2e'ieed that

3ithout practica' training and simu'taneous academic study, proper education is hard to achiee Toac7uire a comp'ete kno3'edge in any su25ect or a specific area, a person needs practica' kno3'edge a'ong

3ith theoretica' kno3'edge

Internship program is a partia' fu'fi''ment of the re7uirements for the degree of Master of Business

Administration (MBA) It is a matter of practica' e8perience indeed ractica' e8periences sure'y spread

the kno3'edge of a student &or this ery specific reason internship program has a specia' significance /o

it is necessary to e8perience practica' app'ication of the theoretica' kno3'edge 9ther3ise the core

o25ectie of education 3i'' not 2e achieed successfu''y

ith great p'easure I had the chance to comp'ete my internship program on +.redit Management of

/ona'i Bank 0imited, a2na Branch- nder the direct superision of my honora2'e teacher Md Amin

Mia, 0ecturer, Department of &inance, Bang'adesh niersity of Business * Techno'ogy (BBT) 4is

constructie adices and suggestions he'ped me a 'ot to successfu''y comp'ete this internship program Iam therefore ery gratefu' to him I a'so thank the officers of /ona'i Bank 0imited, a2na Branch for their

he'p and suggestions I hae tried my 'ee' 2est to co''ect and accumu'ate arious effectie data that

guided me to prepare an informatie report

/ince it is natura' that peop'e make mistakes, this report is not 2eyond that too /o there might hae some

unintentiona' mistakes for 3hich I e8press my sincere regret &ina''y, I 3ish the 2etter success of

eeryone 3ho are interested to read, use or further study on the report

Ashikur Rahman

MBA rogram, "%thIntake

ID: 11!1"#1##$

Department of &inance

Bang'adesh niersity of Business * Techno'ogy (BBT)


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Letter of Transmittal

To

Md Amin Mia

0ecturer

Department of &inanceBang'adesh niersity of Business * Techno'ogy (BBT)

/u25ect : /u2mission of internship report on .redit management of /ona'i Bank 0imited,a2na 2ranch,a2na

Dear sir,

I am tru'y p'eased to su2mit my internship report on +.redit Management of /ona'i Bank 0imited, a2na

2ranch- I hae gathered 3hat I consider to 2e the most comp'ete information aai'a2'e This report gae

me the prospect to hae a 2rief kno3'edge a2out .redit Management of /ona'i Bank 'imited I tried my2est to incorporate a'' the information that I hae co''ected during the internship period

I 3ish the report 3ou'd fu'fi'' your e8pectation and standard I must mention here that, I am e8treme'y

gratefu' to you for your a'ua2'e superision, tire'ess effort and continuous attention in preparing this

report

I, sincere'y hope that you 3i'' 2e satisfied 3ith this report If you any 7uery, I 3i'' 2e p'eased to ans3er

that I hope and pray that you 3ou'd 2e gracious enough to accord approa' to this report

/incere'y6

Ashikur Rahman

MBA program,"%thIntake

ID ;o: 11!1"#1##$

Department of &inanceBang'adesh niersity of Business * Techno'ogy (BBT)


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ACKNOLEDGEMENT

This is my p'easure that I cou'd successfu''y comp'ete my internship report 2y the grace of a'mightyA''ah I 3ant to coney my heartfe't respect and cordia' thanks to Md. Amin Mia'ecturer, Dept of

&inance, Bang'adesh niersity of Business * Techno'ogy (BBT) for his encouragement, guidance,

adices and a'ua2'e superision I am ery 'ucky for getting the opportunity to prepare this report under

his superision and guidance ithout his introduction, it 3as impossi2'e for me to comp'ete this report

successfu''y

I am a'so articu'ate my heartiest appreciation to Mrs


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Table of contents

SL. Particlars Pa!e

No.

.hapter 9;> 11 Introduction of the Report

1" Background of the Report

1 /ignificance of the Report

1! /cope of the Report

1? 925ecties of the Report

1$ Methodo'ogy of the Report

1@ 0imitation of the Report

.hapter T9 An 9erie3 9f /ona'i Bank 0imited

"1 4istory of /ona'i Bank

"" ision of /ona'i Bank

" Mission of /ona'i Bank

"! 9rganiationa' 4ierarchy

"? 9rganiationa' /tructure of /ona'i Bank

"$ Main o25ectie of /ona'i Bank

"@ /erices proided 2y /ona'i Bank

"C rincip'e actiities of /ona'i Bank

"% &ie years .omparatie &inancia' and 9perationa'

erformance 9f /B0 at a


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.hapter T4R>> Theoretica' Background of /ona'i Bank

Inestment, .redit, ay order, Demand Draft, /9D, ..,

rimary /ecurity, .o''atera' /ecurity, 0ease, 0oan, Income

/tatement, Ba'ance /heet

.hapter &9R .redit /ystem of /ona'i Bank 0imited

!1 .redit

!" &actors Re'ated 3ith .redit

! Importance of .redit

!! .redit Management

!? .redit o'icy of /B0

!$ Modes of .redit

!@ .redit rincip'es

!C rincip'es of sound 0ending

!% The .=s of good and Bad 0oan in .redit Management

!1# /tatus of 0oans

!11


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?1 Tota' Deposit of /B0

?" ear 3ise 0oans * Adances

? .redit to Deposit Ratio

?! Industry 3ise 0oans * Adances

?? Geographical area basis distribution of loans and

advances for year 2012

Abbreviations

A/C-Account

B/L-Bill of Lending

BB- Bangladesh Bank

CC-Cash Credit

DD-Demand Draft

DPN- Demand Promissory Note

FC-Foreign Currency

FDD- Foreign Demand Draft

FD-Fi!ed De"osit ecei"t


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".". #ntrodction of t$e Re%ort&

;o3 a day, education is not 5ust 'imited to 2ooks and c'assrooms In today s 3or'd, education is

the took to understand the rea' 3or'd and app'y kno3'edge for the 2etterment of the society as

economy &rom education, the theoretica' kno3'edge is o2tained from course of study, 3hich is

on'y the ha'f 3ay of the su25ect matter ractica' kno3'edge has no a'ternatie The perfect

coordination 2et3een theory and practice is of paramount importance in the conte8t of the

modern 2usiness 3or'd in order to reso'e the dichotomy 2et3een these to areas Therefore an

opportunity is offered 2y dept of finance, uniersity of BBT, for its potentia' 2usiness

graduates to get three month practica' e8perience, 3hich is kno3n, is as +internship rogram-

&or the competition of this internship program, the author of the study 3as p'aced in a 2ank

name'y, +/oma'i Bank 'imited- for a period of three month ("Cth august,"#1? to "Cth

;oem2er,"#1?)

".'. (ac)!rond of t$e re%ort&

>conomy history sho3s that dee'opment has started has started eery3here 3ith the 2anking

system and its contri2ution to3ards financia' dee'opment of country is highest in the initia'

stage As a mandatory re7uirement of Master of 2usiness Administration (MBA) program, I 3as


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assigned to do my internship in /ona'i Bank 0imited for a period of three month &rom practica'

kno3'edge , 3e 3i'' 2e a2'e to kno3 rea' 3or'd situations and start a career 3ith some practica'

e8perience This report + .redit management of sona'i 2ank 'imited-E has 2een prepared to fu'fi''

the partia' re7uirement of MBA program as a mean of internship rogramhi'e preparing this

report, I had a great opportunity to hae an in depth kno3'edge of the 2anking actiities of sona'i

2ank

age61

.redit Management of /ona'i Bank 0imited

".* Si!nificance of t$e Re%ort&

>ducation 3i'' 2e the most effectie 3hen theory and practice 2'ends Theoretica' kno3'edge

gets its perfection 3hich practica' app'ication In addition, the internship is designed to 2ridge

the gap 2et3een the theoretica' kno3'edge and rea' app'ication e a'' kno3 that three is no

a'ternatie of practica' kno3'edge, 3hich is more 2eneficia' than theoretica' aspects The prime

reason of this study is to 2ecome fami'iar 3ith the practica' 2usiness 3or'd and to attain

practica' kno3'edge a2out the oera'' Banking and .orporate 3or'd, 3hich is so much essentia'

for each student to meet the e8treme gro3ing cha''enge in 5o2 market

Sonali (an) Limitedis a state6o3ned 'eading commercia' 2ank in Bang'adesh It is the 'argest

2ank of the country

".+ Sco%e of t$e re%ort&

The report tit'e is +An 9erie3 of .redit Management 2y /ona'i Bank 0imited- This report is

2ased on study carried out on .redit management of /ona'i Bank 0imited using 2oth 7ua'itatie


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and 7uantitatie methods The aim of the study is to find out the credit contro' system performed

2y /ona'i Bank 0td

The scope of this report is 'imited to the oera'' description of the company, its serices and its

financia' performance ana'ysis The scope of the study is 'imited to credit management,

functions, and performances The report 3i'' main'y focus on /B0=s credit offer and is contro'

and management

age6"


"., Ob-ecties of t$e re%ort&

The purposes of this report re'ates 3ith the internship The internship o25ectie is to gather

practica' kno3'edge and e8periencing the corporate 3orking enironment To this regard this

report is contemp'ating the kno3'edge and e8perience accumu'ated from internship program

The o25ecties 2ehind the construction of this report are :

To kno3 the practica' imp'ication of credit management

To hae an in depth kno3'edge of .redit management procedure of /ona'i Bank 0imited

To 5ustify ho3 a 2ank effectie'y emp'oy procedures to 5udge credit3orthiness of

prospectie and e8isting 2orro3er

To differentiate 2et3een practica' and theoretica' 'earning

To o2sere the performance of the 2ank oer a certain time period

"./ Met$odolo!0 of t$e Re%ort&


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As the Topic of the report 3as .redit management, so I needed to co''ect information

regarding the credit contro' procedure

Data 3as co''ected from 2oth primary and secondary sources

The detai's of these sources are high'ighted 2e'o3

"./." Primar0 Sorces&

.ustomer data2ase and historica' data of de'in7uent customers

Interie3s 3ith the approa' officers

age6


"./.' Secondar0 Sorces&

Interna' /ources

/B0=s Annua' Report

>8terna' /ources

Different 2ooks and periodica's re'ated to the 2anking sector

;e3spapers

e2site information

"./.* Data collectin! instrments&

Interie3

During the inestigatie research, in6depth interie3s 3ere conducted 3ith managers,

approa' officers and superisor Information 3as composed persona''y 2y discussing3ith the emp'oyees of the 2ank and superisor

After gathering data, I sorted out the data according to priority and necessity

"., Limitations of t$e std0 &

As, /B0 is a goernment 2ank, it fo''o3s strict ru'es 3hi'e proiding information Again

it is a'so not a 'isted company in the 2ourses, so co''ection of annua' report and necessarypapers 3ere difficu't

D campus 2ranch has ery 'itt'e e8posure regarding the credit, 3hich caused me to go

in 4ead office ery often


12/75

e2site of the 2ank is inade7uate'y constructed and 'ack many updated data regarding

the po'icy and regu'ations

The annua' report of year "#11 is yet to pu2'ish, so the ana'ysis not ade7uate'y updated

Again recent information cannot 2e inc'uded

As per Bank=s comp'iance, as an intern I 3as una2'e to o2tain re7uisite e8periences of

different departments Detai's of many aspects of the serices of /ona'i Bank 0imited hae 2een skipped in this

report due to arious constraints, inc'uding time and space, security reason

age6!


.hapter6"

9rganiation 9erie3

"1 4istory of /ona'i Bank

"" ision of /ona'i Bank

" Mission of /ona'i Bank


13/75

"! 9rganiationa' 4ieararchy

"? 9rganiation /tructure of /ona'i Bank

"$ Main o25ectie of /ona'i Bank

"@ /erices proided 2y /ona'i Bank

"C rincip'e actiities of /ona'i Bank

"% /B0 at a


14/75

mi''ion taka In "##1, its authorised and paid up capita' 3ere Tk 1# 2i''ion and Tk "@" 2i''ion

respectie'y resent'y, its authorised and paid up capita' is Tk 1# 2i''ion and Tk % 2i''ion

respectie'y The 2ankFs resere funds 3ere Tk $# mi''ion in 1%@% and Tk "#?# 2i''ion on #

Gune "### /ona'i Bank has a tota' of 1"#@ 2ranches 9ut of them, ! are 'ocated in ur2an areas,

C$" in rura' areas, and " are 'ocated oerseasH$It a'so operates the /ona'i >8change .ompany

Inc in /A and /ona'i Bank (J) 0td, nited Jingdom, to faci'itate foreign e8change

remittances /ona'i Bank J remits up to 1! destinations across Bang'adesh direct'y, these

inc'ude Dhaka, .hittagong, /y'het, Mau'i2aar, Beani2aar, Ba'agan5, Bis3anath,

Gagannathpur, /unamgan5,


15/75

Dedicated to e8tend a 3ho'e range of 7ua'ity products that support diergent needs of peop'e aiming at

enriching their 'ies, creating a'ue for the stakeho'ders and contri2uting to3ards socio6economic

dee'opment of the country

'.+ Or!ani2ational 3ierarc$0 &

/'

;o

;ame of Directors osition

1 Mr &a'e Ja2i .hairman

" Mr Ran5it kumar .haka2orty Director

#r$ #d$ Na%ibar ahman Director

! #r$ &hekhar Dutta Director

? #rs$ &elima Ahmad Director

$ #r$ #d$ #ahboob 'ossain Director

@ #r$ #d$ &haheb Ali #ridha Director

C Mr kai Tariku' Is'am Director

% #r$ #d$ (namul 'a)ue

Choudhury

Director

1# #r$ A$*$# e%aur ahman Director

11 #r$ Pradi" *umar Dutta #anaging Director +

C(,

Ta2'e "1: 9rganiationa' 4ierarchy


age6$

'., Or!ani2ational strctre of Sonali (an) &
http://www.sonalibank.com.bd/profiles/dir_najibar_rahman.htmhttp://www.sonalibank.com.bd/profiles/dir_shekhar_dutta.htmhttp://www.sonalibank.com.bd/profiles/dir_selima_ahmad_mam.htmhttp://www.sonalibank.com.bd/profiles/dir_mahboob_hossain.htmhttp://www.sonalibank.com.bd/profiles/dir_shaheb_ali_mridha.htmhttp://www.sonalibank.com.bd/profiles/dir_enamul_haque.htmhttp://www.sonalibank.com.bd/profiles/dir_enamul_haque.htmhttp://www.sonalibank.com.bd/profiles/dir_rezaur_rahman.htmhttp://www.sonalibank.com.bd/ceo.phphttp://www.sonalibank.com.bd/profiles/dir_najibar_rahman.htmhttp://www.sonalibank.com.bd/profiles/dir_shekhar_dutta.htmhttp://www.sonalibank.com.bd/profiles/dir_selima_ahmad_mam.htmhttp://www.sonalibank.com.bd/profiles/dir_mahboob_hossain.htmhttp://www.sonalibank.com.bd/profiles/dir_shaheb_ali_mridha.htmhttp://www.sonalibank.com.bd/profiles/dir_enamul_haque.htmhttp://www.sonalibank.com.bd/profiles/dir_enamul_haque.htmhttp://www.sonalibank.com.bd/profiles/dir_rezaur_rahman.htmhttp://www.sonalibank.com.bd/ceo.php


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Ta2'e "": 9rganiationa' structure of /ona'i Bank


age6@


17/75

'.4 Serices %roided b0 Sonali (an) &

/ona'i Bank 0imited offers mu'tip'e specia' serices 3ith its net3ork of 2ranches throughout the

country in addition to its norma' 2anking operations

Collection&

'ectricity 2i''s

Te'ephone 2i''s

ater/e3erage 2i''s

Municipa' ho'ding Ta8

assport fees, isa fees and Trae' ta8

.ustoms * >8cise duties

/ource ta8 and AT

Gakat fund

4a55 deposit

0and dee'opment ta8


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Pa0ment&

ension of emp'oyees of


19/75

Materna' a''o3ances for poor 3omen

Disa2i'ity a''o3ances

Sale 5 Encas$ment6Prc$ase&

/aings .ertificates

I.B nit .ertificates

rie Bonds

age >arnerFs Dee'opment Bonds

/ Do''ar remium * Inestment Bond

0ottery tickets of different /emi68change of soi'ed torn notes

Misc. Serices&

Bank ac information of ta8 payee c'ient according to demand of ;BR

0oca' n'ist of ;on


20/75


age6%

'.7 Princi%le actiities of Sonali (an) &

Sonali (an) Limitedis a state6o3ned 'eading commercia' 2ank in Bang'adesh It is the 'argest

2ank of the countryThe of the Bank is to actie'y participate in the socio6economic

dee'opment of the nation 2y opening a commercia''y sound Banking system It proides creditto desering 2orro3ers and at the same time, protects depositor=s interest

De%osits&

/ona'i Bank mo2i'ied tota' deposit of BDT tk 819,472,541,302.rore as of Gune #, "#1?

As compared to BDT tk 778,042,88,301 .rore as of Decem2er 1, "#1! .omparatie

interest rates deposit mo2i'iation efforts of the 2ank and confidence reposed 2y the customer in

the 2ank contri2uted to the nota2'e gro3th in deposit The 2ank eo'ed a num2er of attractie

deposit schemes to care to the re7uirement of sma'' and medium serices

Type As on #6#$6"#1? As on161"6"#1!

.urrent and others account deposits 1@$,#C,?C@,!#$ 1$",?"%,@C,@%%

Bi''s paya2'e 11,C%1,C?",?## 1",$@$,!1,??#

/aings Bank Deposit "#","!#,@%C,@% 1C%,$%$,##?,C##

&i8ed Deposit !"%,#1,#,#1@ !1,1!#,%$",1?"

Tota'

819,472,541,302 778,042,88,301


21/75

Table '.*& Total de%osit of Sonali (an) on 8ne *9 t$:'9",

.redit Management of /ona'i Bank 0imited age61#

0oan and Adances :

The main focus of /ona'i Bank credit 'ineprogram is financing 2usiness, Trade and industria' actiities

through an effectie de'iery system /ona'i Bank offers credit to a'most a'' sectors of commercia'

actiities haing productie purpose The 'oan portfo'io of the 2ank encompasses a 3ide range of credit

programs coering a2out "## items .redit is a'so offered to 1?(fifteen) thrust sectors, as earmarked 2y

the got at a reduced interest rate to dee'op frontier industries .redit faci'ities are manufactures,

corporate 2odies, etc &o''o3ing the guide'ines of Bang'adesh Bank, credit faci'ities hae 2een e8tended

to productie and priority sectors The outstanding 'oan * adance of the 2ank is Tk "1,1$$ mi''ion on

1stDecem2er, "##C 0oan * Adances for the year "### to "#oC are gien 2e'o3:

ear Tota' 0oans * adances (Tk in mi''ion)

"###1,"C1

"##11!1,%%

"##"1?$,11

"##1??,1%@

"##!1$C,"C


22/75

"##?""@,#1#

"##$"!1,#"%

"##@"#$,!C

"##C"1,1$$

Ta2'e "!: Tota' 0oans * Adances of /ona'i Bank on 1th Decem2er , "##C

#nestment :

To earn profit, the Bank prudent'y inests its fund to different sectors The inestment portfo'io of the

Bank is comprised of treasury 2i'', other 2onds, De2enture, share etc The Bank earns a handsome profit

from this inestment portfo'io ear 3ise inestment of the Bank is /ho3n in the fo''o3ing ta2'e :

ear Tota' Inestments (Tk in mi''ion)

"###!!,""?

"##1,!#?

"##"!,C$@

"##!?,!%#

"##!

?C,C%$

"##?!,$$

"##$%,%@C

"##@CC,C%1

"##C%?,#%

Ta2'e "?: Tota' Inestment of /ona'i Bank on 1th Decem2er "##C

!"#$!%all & "ediu% #nterprise' (oan


23/75

/ona'i Bank 0imited emphasies highest priority on /M> financing for e'iminating poerty 2y

increasing /M> 'oan f'o3 at economica''y underdee'oped area and peop'es /etting up priority

2ase /M> credit o'icy for omen and underprii'eged entrepreneurs, /ona'i 2ank 3orking for

the improement of their socio6economic condition

Lendin! Polic0:

1) Loan Limit:

BDT ?#,###6(&ifty thousand) to BDT 1,?#,##,###6(9ne .rore &ifty 0acs)

") Criteria of (orro;er:

)angladeshi *iti+en %ini%u% 18 $eighteen' years old

(oan defaulter, )an-.rupt, "entally /rea-ed person cannot apply for

loan

o%en #ntrepreneurs highly encourage to apply

) Natre of Pro-ect6Enter%rise:

roprietorship #nterprise


24/75

egistered artnership #nterprise

rivate (i%ited *o%pany

oint enture *o%pany e6cept ublic (i%ited *o%pany

!) Secrit0:

he collateral security free loan li%it for %ale entrepreneurs is upto

- 5 lac

he collateral security free loan li%it for /o%en entrepreneurs is upto

- 10 lac

?) Period:

roecter% (oan: "a6i%u% 5 years $proect period %ay ;e6ible

according to roect nature'

or-ing capitalrading (oan : 1 year, rene/able at the end of period

$) Loan& E


25/75

loan period

Net Profit &

ear Pro.tin tk01223 2080387231224 $327534028'1225 2311114502

1226 9735801201227 153708

Ta2'e"$: ;et profit of /ona'i Bank on 1stDecem2er "##%

Portfolio ;ise #nestment of Sonali (an) &

As on December *": '9"'& =Ta)a in Crore>

Description 8change .o 0td 6 6 @?C @?C

/ona'i Inestment 0TD 6 6 "#### "####

/ona'i o'aris &T 0td 6 6 "% "%


26/75

rie Bonds 1#@$ 6 6 1#@$

9erseas Branches 6 6 11# 11#

Tota' 1"%%%%! ?$# 1C??!C 1!C%1#"

Ta2'e"@: ortfo'io 3ise Inestment of /ona'i Bank on 1 stDecem2er "#1"

'.? Fie 0ear Com%aratie Financial and O%eration %erformance Of S(L at a !lance&

(Tk in crore)

@ear

'997 '994 '99/ '99, '99+

Total #ncome

"$$"1# 1!"%#" "11@ 1%C$% 1?@?C!

Total E%enses

"?##!1 1##!" "#1"?% 1?%## 1!C#?%

Total O%eratin! Profit

1$1$% !"!@# ##?C %$$ %?"?

Net Profit6Net Loss

"111 %@$ ($"@?$) "#C# 1?@?

PaidB% Ca%ital %#### %#### ?#### "@"" "@""

Resere Fnd

1"!$%? 11%$"C "C1 #!# "C!#

De%osits

$!C$# "C%%@" #"## "@@#@%# "?""%


27/75

Adances

"11$$$ "#$!@$ "!1#"% ""@##%$ 1$C"C#

E%ort

1C"C!$ 1@#""!" 1@C1!!# 1%?@$ 1"@?%"C

#m%ort

1$!"#C# CCC1%$ C"@%$# 1"%C!1 %1?C%

No. of Em%lo0ees&

Officer

Staff

11?#@

1#"

11@$%

1#@@

1"11C

111??

1"C#

11??

1"@"

11@1C

Total

"1C% ""?!" ""@ "% "!!?#

No. of (ranc$es&

rban

Rral

?$

$1%

?$"

$"1

?$"

$"1

?$"

$"1

!%#

$%$

Total

11C" 11C 11C 11C 11C$

Table'."" &S(L at a Glance


28/75

Inestment:

In finance, the purchase of a financia' product or other item of a'ue 3ith an e8pectation of faora2'e

future returns In genera', terms, inestment means the use money in the hope of making more money

.redit :

.redit is a contractua' agreement, in 3hich a 2orro3er receies something of a'ue no3, 3ith the

agreement to repay the 'ender at some data in the future

ay order:

A pay order is a draft issued 2y one another or on its 2ranch The purchase of a draft makes to the se''er in

'oca' currency at the domestic center 3hi'e the paying after presentation of the draft 2y the 2eneficiary

There is a'so risk of 'oss of the draft

Demand Draft :

The person intending to remit the money through a pay order has to deposit the money to 2e remitted 3ith

the commission, 3hich the 2anker charges for its serices

The amount of commission depended on the amount to 2e remitted 9n issue of the pay6order the remitter

does not remit a party to the instrument (1) dra3er 2ranch (") dra3ee 2ranch () payee This is treated as

the current 'ia2i'ity of the 2ank as 2anker on the presentation of the instrument shou'd pay the money

/ecured oerdraft6/9D (&9) :

Adance is


29/75

.ash credit N.. (4ypothecation) : The mortgage of moa2'e property for securing 'oan is ca''ed

hypothecation 4ypothecation is a 'ega' transaction 3here2y goods are made aai'a2'e to the 'ending

2anker as security for a de2t 3ithout transferring either the property in the goods or either possessing

.ash .redit6.. ('edge) : Transfer of possession in the 5udicia' sense of essentia' in the a'id p'edge Incase of p'edge, the 2ank ac7uire the possession of the goods or a right to ho'd goods unti' the repayment

for credit 3ith a specia' right to se'' after due notice to the 2orro3er in the eent of non6repayment

rimary security :

There are the securities taken 2y the o3nership of the items for 3hich 2anks proides the faci'ity

.o''atera' /ecurity :

.o''atera' security refer to the securities deposited 2y the third party to secure the adance for the

2orro3er in narro3 sense, it denotes any type of security on 3hich the 2ank has a persona' right of action

on the de2tor in respect of the adances

0ease :

A 3ritten agreement under 3hich a property o3ner a''o3s a tenant to use the property for specified period

of time and rent

0oan:

An agreement in 3hich a 'ender gies money or property to a 2orro3er, and the 2orro3er agrees to return

the property or repay the money, usua''y a'ong 3ith interest, at some future points in time sua''y, there

is a predetermined time for repaying a 'oan (through modern capita' markets hae dee'oped many 3ays

of managing the risk)

Income /tatement : An accounting of sa'es, e8penses, and net profit for a gien period

Ba'ance /heet : A 7uantitatie summary of a company financia' condition at a specific point in time,

inc'uding assets a company o3ns and the second part sho3s a'' the financing methods (such as 'ia2i'ities

and shareho'ders= e7uity) a'so ca''ed statement of condition


30/75

;ationa' Bank of akistan 3as the 'argest commercia' 2ank in the then >ast akistan After

'i2eration of Bang'adesh in 1%@1, this 2ank a'ong 3ith t3o sma''er 2anks, remier Bank and

Bank of Baha3a'pur 3ere merged into Sonali (an) The 2ank 3as nationa'ied under

ducation Deposit /cheme (>D/)

Medicare Deposit /cheme (MD/)

Month'y >arning /cheme (M>/)


31/75

Marriage /aings /cheme (M//)

Rura' Deposit /cheme (RD/) and

Dou2'e Benefit /cheme (DB/)

Credit Sc$emes

Sonali (an)proides 'oans under the fo''o3ing programs:

.onsumer .redit

/pecia' /ma'' .redit

IT &inance

0oan for Diagnostic .enter

0oan scheme for >mp'oyment A2road

.onsumer .redit 'oan is designed to support permanent emp'oyees in


32/75

Those 3ho get 5o2s a2road and need money to pay Air Tickets, 'ega' commissions * serice

charges for the agent firm are entit'ed for the 'oan from >mp'oyment A2road /cheme ay2ack

period is decided at per their 5o2 contract

Rral Credit Sc$eme

C?L of our popu'ation 'ies in rura' areas of Bang'adesh and @?L earn their 'iing from

agricu'ture /o 3ithout 2oost up of agricu'ture our economy 3on=t gro3 Sonali (an)ery

correct'y addresses it through the Rura' .redit /cheme The scheme proides 'oan under the

fo''o3ing criteria:

.rop 0oan

/pecia' Inestment rogram

&arming * 9ff &arming program

Jrishi Jhamar Rin Jarmasuchi

ond &isheries .redit rogram

&erti'ier Dea'ers .redit rogram

/ugarcane roduction 0oan rogram

/ocia' &orestation rogram

A'' these credit programs are ery much suita2'e for our rura' peop'e and society and in the mean

time these efforts hae started to gie resu't The resu'ts are ery encouraging

Microcredit

Microcredit is internationa''y accepted too' for poerty a''eiation and sti'' 3e hae a 'ot of

peop'e 2e'o3 the poerty 'ee' /o microcredit can=t 2e ignored Sonali (an)2eing committed


33/75

for peop'e and society has 2een participating in the fie'd actie'y since "## A2out "# pro5ects

under the scheme are in progress

#ndstrial Finance

&or industria' dee'opment of the country Sonali (an)proides 'ong term 'oan against ne3

industries and BMR> program of e8isting industries nder different schemes it addresses thrust

sector,


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Inf'ation

&inance .harge

! Importance of .redit :

.redit p'ays a ita' ro'e in nationa' economy in the fo''o3ing 3ays6

It proides 3orking capita' for industria'iation

It he'ps to create emp'oyment opportunities

.redit contro's a'most a'' kinds of production actiities of the country

It 2rings socia' e7uity

.ash generation occurs for its successfu' performance

Business cyc'e can run 3e'' on'y 2y the he'p of 'ending system

>conomic sta2i'iation

Raise standard of 'iing

!! .redit Management :

.redit management is a dynamic fie'd 3here a certain standard of 'ong6range p'anning is needed to

a''ocate the fund in dierse fie'd and to minimie the risk and ma8imiing the return on the inested fund

.ontinuous superision, monitoring and fo''o36up are high'y re7uired for ensuring the time'y repayment

and minimiing the defau't Actua''y, the credit portfo'io is not on'y constituted the 2ank=s asset structure

2ut a'so a ita' factor of the 2ank=s success The oera'' success in credit management depends on the

2anks credit po'icy, portfo'io of credit, monitoring, superision and fo''o36up of the 'oan and adance

Therefore, 3hi'e ana'ying the credit management of TB0, it is re7uired to ana'ye its credit po'icy, credit

procedure and 7ua'ity of credit portfo'io

!? .redit o'icy of /B0:

9ne of the most important 3ays, a 2ank can make sure that its 'oans meet organiationa' and regu'atory

standards and they are profita2'e It is important to esta2'ish a 'oan po'icy /uch a po'icy gies 'oan

management a specific guide'ine in making indiidua' 'oans decisions and in shaping the 2ank=s oera''

'oan portfo'io In /ona'i 2ank 0imited there is perhaps a credit po'icy 2ut is no credit 3ritten po'icy

!$ Modes of credit:

0oan and adance hae primari'y 2een diided into ma5or groups:


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.ontinuous 'oan :

These are the adances haing no fi8ed repayment schedu'e 2ut hae a date at 3hich it is rene3a2'e on

satisfactory performance of the c'ients .ontinuous 'oan main'y inc'udes +.ash credit 2oth hypothecation

and p'edge- and +oerdraft-

Demand 'oan:

In opening 'etter of credit (0.), the c'ients hae to proide the fu'' 0. amount in foreign e8change to

the 2ank To purchase this foreign e8change, 2ank e8tends demand 'oan to the c'ients at stipu'ated margin

;o specific repayment date is fi8ed 4o3eer, as soon as the 0. documents arrie, the 2ank re7uests the

c'ients to ad5ust their 'oan and to retire the 0. documents Demand 'oans main'y inc'ude +payment

against documents,- 0oan against imported merchandise (0IM)- and +0ater of trust Receipt-

Term 'oan :

These are the adances made 2y the 2ank 3ith a fi8ed repayment schedu'e Terms 'oans main'y inc'ude

+.onsumer credit scheme-, +0ease finance-, +4ire purchase-, and +/taff 'oan- The term 'oans are

defined as fo''o3s:

/hort6 term 'oan K p to 1" months

Medium term 'oan : More than 1" months * up to $ months

0ong6term 'oan : More than $ months

!@ .redit princip'es :

In the feature, .redit princip'es inc'ude the genera' guide'ines of proiding credit 2y 2ranch manager or

credit officer In Trust 2ank 'imited they fo''o3 the fo''o3ing guide'ine 3hi'e giing 'oan and adance to

the c'ient

.redit adancement sha'' focus on the dee'opment and enhancement of customer re'ationship

A'' credit e8tension must comp'y 3ith the re7uirements of 2ank=s Memorandum and Artic'e of

Association, Banking .ompany=s Act, Bang'adesh Bank=s instructions, other ru'es and regu'ation

as amended from time to time

0oans and adances sha'' norma''y 2e financed from customer=s deposit and not out of temporary

funds or 2orro3ing from other 2anks

The 2ank sha'' proide suita2'e credit serices for the markets in 3hich it operates


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It shou'd 2e proided to those customers 3ho can make 2est use of them

The conduct and administration of the 'oan portfo'io shou'd contri2ute 3ithin defined risk

'imitation for achieement of profita2'e gro3th and superior return on 2ank capita' Interest rates

of arious 'ending categories 3i'' depend on the 'ee' of risk and types of security offered

!C rincip'es of /ound 0ending :

It shou'd 2e c'ear'y understood that the criteriaprincip'es are not inf'e8i2'e 'a3s * are gien as guide'ines

for protecting credit In a practica' competitie 3or'd, risk are defined, accepted and credit is often

granted een through a proposa' does not strict'y 3ith some of the criteria descri2ed 2e'o3:

The 2asic 'ending criteria can 2e considered as eight main headings, as fo''o3s :

rincip'e of /afety rincip'e of 0i7uidity

rincip'e of purpose

.haracter and a2i'ity of the 2orro3er

rincip'e of /ecurity

rincip'e of profita2i'ity

/ource of repayment

rincip'e of ;ationa' Interest

>ach of the headings 3i'' no3 2e discussed further in the fo''o3ing paragraph:

rincip'e of /afety:

The &irst 'ending princip'e of sound 'ending is safety The ery e8istence of a 2ank depends upon the

safety of its adances /afety shou'd not 2e sacrificed for profita2i'ity /o utmost care shou'd 2e e8ercised

to ensure that the funds go to the right type of 2orro3er, are uti'ied in such a 3ay that they remain safe

and repayment comes in the norma' course

rincip'e of 0i7uidity :

0i7uidity means the aai'a2i'ity of Bank funds on short notice The 'i7uidity of an adance means it

repayment on demand on due date or after a short notice Therefore, the 2anks must hae to maintain

sufficient 'i7uidity to repay its depositors and trade off 2et3een the 'i7uidity and profita2i'ity is must


37/75

rincip'e of purpose:

The 2ank shou'd not 'end money for any purposes for 3hich a 2orro3er may 2e free from a'' risks 2ut if

the funds 2orro3er are emp'oyed for unproductie urpose 'ike marriage ceremony, p'easure trip etc or

specu'atie actiities, the repayment in the norma' course 3i'' 2ecome uncertain Banks therefore

discourage adances from 2oarding stocks and refuse adances for specu'atie actiities

.haracter and a2i'ity of the 2orro3er :

The primary responsi2i'ity of the 'eading 2anker is +kno3 your customer and his 2usiness- hi'e

considering the character and a2i'ity of a 2orro3er, the fo''o3ing point must 2e kept in mind

Do kno3 your customer a'readyO

as he respectie'y introducedO If he 3as preious'y customer of another 2ank, has he come to Trust Bank 0td Try to see

preious 2ank statementO

4ae you made the account opening in7uiries re7uired 2y the 2ankO

hat are the 2usiness o3nershipO

hat is the customer=s 2ackground and financia' track recored O

.ustomer=s honesty * integrity and persona' sta2i'ityO

4o3 has the customer managed his financia' circumstances in the pastO

The 2ranch manager shou'd hae the ans3er of the a2oe 7ueries and shou'd 2e to 5udge his a2i'ity to use

the credit faci'ities to his adantage Adance shou'd 2e granted on'y to those 2orro3ers in 3hom the

2ranch manager has fu'' confidence Integrity of the 2orro3er and his a2i'ity to conduct 2usiness are of

paramount importance and take precedence oer the a'ue of securities offered

rincip'e of /ecurity:

The security offered 2y a 2orro3er for an adance is insurance to the 2anker It seres as the safety a'ue

for an unforeseen emergency /o another princip'e of sound 'ending is the security of 'ending The

security accepted 2y a 2anker to coer a 2ank adance must 2e ade7uate, readi'y marketa2'e, easy to

hand'e and free from any encum2rance

rincip'e of profita2i'ity:

Banking is essentia''y a 2usiness, 3hich aims at earning of a good profit The 3orking funds of a 2ank are

co''ected main'y 2y means of deposit from the pu2'ic and interest has to 2e paid on those deposits Banks


38/75

hae a'so to meet their esta2'ishment charges and other e8penses Interest earned 2y a 2ank on its adance

is the main source of its income The different 2et3een the interest receied on adances and the interest

paid on deposits constitute a ma5or portion of the 2anker=s income Besides foreign e8change 2usiness is

a'so high'y remuneratie The 2ank 3i'' not enter into a transaction un'ess a fair return form it is assured

/ource of repayment:

After the 2ranch manager has ensured that the credit 3i'' 2e a profita2'e propositioning for the 2ank, he

shou'd then turn his attention to the cash f'o3 situation of the 2orro3er The 2ank=s credit can 2e

c'assified into three main categories as fo''o3s:

A ery short6term adance 3i'' 2e 'i7uidated 2y the funds receied in the ery near future, such

as adances against foreign or 'oca' 2i''s or 2ridge functioning 3here eidence of credit sanction

from another financia' institution is aai'a2'e

roision for current assetsK this type faci'ity is needed for trading and or manufacturing

actiities

0ong6term 'oans, genera''y oer ? yearK e8amp'e of such faci'ities as inestment in p'ant and

machinery, a farm or a shop, genera''y, a 'ong term is repaid out profit generated 2y the 2usiness

rincip'e of nationa' interest :

The dee'opment of 2anking has reached a stage 3here a 2anker is re7uired to identify his 2usiness 3ith

nationa' po'icies Banking Industry has significant ro'e to p'ay in the economic dee'opment of a country

/o, the saings of the peop'e, 3hich are mo2i'ied 2y 2anks, must 2e distri2uted to those sectors, 3hich

re7uire dee'opment in the country=s p'anning program

!% The .=s of


39/75

The outcome of ana'ying the character is to hae oera'' idea a2out the integrity, e8perience, and

2usiness sense of the 2orro3er T3o aria2'esK Interactioninterie3, and Market research are used to

ana'ye the character of the 2orro3er

1Interaction interie3 : the indicators are:

rompt and consistent information supp'y, information gien has not 2een found fa'se

(i''ingness to gie information)

.IB a'so reea's 2usiness character

i''ingness to gie o3ns stakee7uity * co''atera' to coer

Ta8 payer

"Market Research:

Information on 2usiness is erified

Dea'ing 3ith supp'ier and or customer as supp'ier is a'so a kind of 'enderK the payment character

can a'so 2e erified

.apita':

&or identifying the capita' inested in the 2usiness can 2e disc'osed using the fo''o3ing

indicators: &inancia' /tatements

Receia2'e, paya2'e, statements to practica''y assess the 2usiness positions;et 3orth through

financia' statements or from dec'aration of Assets * 0ia2i'ity statement

.apacity (.ompetence):

.apa2i'ity of the 2orro3er in running the 2usiness is high'y emphasied in the time of se'ecting a good

2orro3er As the management of the 2usiness is the so'e authority to run the 2usiness that is use the fund

efficient'y, effectie'y and profita2i'ity The indicators he'p to identify the capacity of the 2orro3er

>ntrepreneurship ski''s ie risk ta'king attitude sho3n 2y e7uity mo2i'iation

Management competencies 2oth marketing and products detai', a2i'ity to take decision

Resi'ience or shock a2sorption: connection, 2ack up (if first time fa''s second 'ines come to he'p)

.o''atera':


40/75

Make sure that there is a +second 3ay out- of a credit, 2ut do not a''o3 that to drie the credit decision

.ash &'o3: .ash f'o3 is the ita' factor that is used to identify 3hether the 2orro3er 3i'' hae enough

cash to repay the 'oan or adance .ash keeps the 'i7uidity to ensure repayment The re'ationship manager

tries to identify the annua' cash f'o3 from the su2mitted statements

.onditions: nderstanding the 2usiness and economic conditions can and 3i'' change after the 'oan is

made

.omp'acency : Do not re'y on past history to continue /tay a'ert to 3hat can go 3rong in any 'oan

.ommunication: /hare credit o25ecties and credit decision making 2oth ertica''y and 'atera''y 3ithin

the 2ank

.redit Puery: The 'oans and adance department gets a form fi''ed up 2y the party seeking a 'ot of

information

Loan classification

Monitoring can 2e done through 'oan c'assification 0oan is main'y c'assified to understand that 3hich

'oan account are performing 3e'' (regu'ar'y interest payment, time'y repayment, and time'y rene3a' etc)

and 3hich are not In c'assifying the 'oan and adance there are t3o c'asses in the 'oan reie3 practiced

in S(L. T$e0 are as follo;s as t$e table.

nclassified& The 'oan account is performing satisfactory in the terms if its insta''ment and no

oerdue is occurred

Classified& The 'oan account is not performing satisfactory in the terms of insta''ments and oerdue

is occurred These types of 'oan need c'ose monitoring to stop the deteriorating position

Sbstandard&The main criteria for a su2standard adance are that despite these technica'ities or

irregu'arities no 'oss is e8pected to 2e arise for the 2ank These accounts 3i'' re7uire c'ose superision 2y

management to ensure that he situation does not deteriorate further

Dobtf': This c'assification contains 3here dou2t e8ists on the fu''y recoery of the 'oan or adance 2utcannot 7uantifia2'e at this stage

(ad 5 Loss: A particu'ar 'oan or adance fa'' in this c'ass 3hen it seems that this 'oan or adance is not

co''ecta2'e or 3orth'ess een after a'' security has 2een e8hausted


41/75

In the fo''o3ing ta2'e the criteria to 2e fa'' in c'assified category are summaried:

/u2standard Dou2tfu' Bad * 0oss

months and a2oe 2ut 'ess

than $ month

$ month and a2oe 2ut 'ess than

1" month

;ot recoer 3ithin more than 1"

months

!11


42/75

After receiing the app'ication for adance, Trust 2anks end a 'etter to Bang'adesh Bank for o2taining a

report from there This report is ca''ed .IB (.redit Information Bureau) report Trust 2ank genera''y

seeks this report from the head office for a'' kinds of inestment The purpose of this report is to 2eing

informed that 3hether the 2orro3er has taken 'oan from any other BankK if Qyes= then 3hether the party

has any oerdue amount or not

D rocessing 'oan proposa':

After receiing .IB report from Bang'adesh Bank, then respectie 2ranch prepare an inestment

proposa', 3hich contains terms and conditions of Inestment for approa' of 4ead 9ffice Documents

those are necessary for sending Inestment proposa' are:

;ecessary Documents:

hi'e adancing money, 2anks create a 'ot of documents, 3hich are re7uired to 2e signed 2y the

2orro3ers 2efore the dis2ursement of the 'oan 9f them some are technica''y ca''ed charge documents

;ecessary steps and documents:

1) 0oan app'ication from du'y signed 2y the customer

") Acceptance of the term and conditions of sanction adice

) Trade 'icense

!) In case of artnership &irm, copy of registered partnership deed du'y certified as true copy or a

partnership deed on non65udicia' stamp of taka61?# denomination du'y notaried

?) In .ase of 0imited .ompanya .opy of memorandum and artic'es of association of the company inc'uding certificate of

incorporation du'y certified 2y registered Goint stock .ompanies (RG/.) and attested 2y

the managing director and accompanied 2y an up6 to Ndate 'ist of directors

2 .opy of 2oard reso'ution of the company for aai'ing credit faci'ities and authoriing

managing directorchairmandirector for e8ecution of documents and operation of the

accounts

c An undertaking not to change the management of the company and the memorandum and

artic'e of the company 3ithout prior permissiond .opy of 'ast audited financia' statement up to 'ast years

e ersona' guarantee of the directors inc'uding the chairman and managing director

f .ertificate of registration of amendment of charges oer the fi8ed and f'oating assets of

the company du'y issued 2y RG/. in case of repeat 'oan or change in terms and

conditions of sanction adice regarding 'oan amount and securities etc


43/75

g .ertificate of registration of charges oer the fi8ed and f'oating assets of the company

du'y issued 2y RG/.

$) Demand promissory notes@) 0etter of hypothecation of stocks and goods

C) 0etter of hypothecation of 2ooks de2t and receia2'e

%) 0etter of hypothecation of p'ant * machinery and persona' 'etter and gurantee

Re7uired Doc=s for Retai' (Indiidua') 0oan:

hotograph6" .opies

assport;ationa' IDDriing 0icense

isiting card .ompany ID

Tin

Trade 0icense(for Businessman)

09I (&or serice ho'der)

ti'ity Bi''( >'ectricityA/A'igi2'e photo 3ith signature, Attested 2y app'icant ,isiting card, TI;

/anction 'etter 3ith re'ated Bank statement (If >n5oying any 0oan)

Re7uired Doc=s for /M>:

Tota' stock

Tota' sa'e for 1 year


44/75

To recommend if the pro5ect is not designed proper'y

To 5ustify the soundness of an inestment

To ensure repayment of Bank finance

Techni7ues of ro5ect Appraisa':

An appraisa' is a systematic e8ercise to esta2'ish that the proposed pro5ect is a ia2'e preposition

Appraising officer checks the arious information su2mitted 2y the promoter in first information sheet,

app'ication for inestment and Inestment proposa'

/ona'i 2ank considers the fo''o3ing aspects in appraising a proposa'

Technica' ia2i'ity

.ommercia' ia2i'ity

&inancia' ia2i'ity >conomic ia2i'ity

The 4ead office (49) main'y checks the technica', .ommercia' and financia' ia2i'ity of the pro5ect

&or others 4o is dependent on 2ranch=s information 4o3eer , 3hen the inestment sie is 2ig, then

the 49 erifies the authenticity of information physica''y

& 4ead 9ffice Approa':

hen 4ead office receie appraisa' from the 2ranch then, head 9ffice again appraises the pro5ect If

it seems to 2e a ia2'e one, the 49 sends it to the Board of Directors for the approa' of the

inestment The Board of Directors (B9D) considers the proposa' and takes decision 3hether to

approe the inestment or not If the B9D approes the inestment, the 49 sends the approa' to the

concerned 2ranch

The respectie officer of 4ead office appraises the pro5ect 2y preparing a summary named +Top

/heet- or +>8ecutie /ummary- and then he sends it to the 4ead office .redit Diision for the

approa' of the 0oan The 4ead 9ffice .redit Diision considers the proposa' and takes decision

3hether to approe the Inestment or not If the .ommittee approes the inestment, the 49 sends

the approa' to the concerned 2ranch


45/75

After getting the approa' of the 49, the 2ranch issues sanction 'etter to the 2orro3er A

sanction 'etter contains:

;ame of 2orro3er,

&aci'ity a''o3ed

urpose,

Rate of interest, eriod of the Inestment and mode of ad5ustment,

/ecurity and 9ther terms and condition

4 Documentation:

If the 2orro3er accepts the sanction 'etter, the Documentation starts Documentation is a 3ritten statement

of fact eidencing certain transactions coering the 'ega' aspects du'y signed 2y the authoried persons

haing the 'ega' status The most common documents used 2y the /ona'i 2ank for sanctioning different

kinds of inestment are:

Goint romissory ;ote,

0etter of arrangement,

0etter of Dis2ursement,

0etter of Insta''ment,

0etter of .ontinuity,

Trust Receipt

.ounter


46/75

/ona'i Bank To oercome the pro2'em of oerdue 'oan, the 2ank need take particu'ar 'oan recoery

program

!1 Recoery patterns of 0oan and adances:


47/75

high and the 7ua'ity of goods is not of re7uired of standard As a resu't, they 2ecome the 'osing

concerns and the amount of 2ad 'oan increases

! Rapid e8pansion of 2usiness: There are many companies, 3hich e8pand their 2usiness rapid'y,

2ut the e8pansion is for short time In the end , the amount of c'assified 'oan increases

B ro2'ems created 2y the goernment

The fo''o3ing pro2'ems are arisen 2y the goernment:

1 >8terna' pressure: /ona'i Bank 0td 4as a'so faced many pro2'ems in the 'oan recoery process as a

part of continuous pressure from arious interested groups

" 0oan to goernment organiation: /ona'i Bank 0td Is 2ound to sanction 'oan to goernment

organiation, though these are 'osing concern &or this reason, 2anks faced pro2'ems in 'oan

recoery

0ega' pro2'ems: >8isting ru'es and regu'ations are insufficient to coer the 'ega' aspects of 'oan

recoery As a resu't, defau'ters can get re'ease easi'y from a'' charges against them

! &re7uent changes in goernment po'icies concerning recoery of 'oan,

. ro2'ems created 2y the 2ank:

The fo''o3ing pro2'ems are created 2y the 2anks:

1 0ack of ana'ysis of 2usiness risk: Before 'ending, /ona'i Bank 0td Does not proper'y ana'ye the

2usiness risk of the 2orro3ers and the 2ank cannot forecast 3hether the 2usiness 3i'' succeed or

fai' If it fai's to run 3e'', the 'oan 2ecomes c'assified" 0ack of proper a'uation of security or mortgage property: In most cases, 2ank fai's to determine

the a'ue of security against the 'oan As a resu't, if the 'oan 2ecomes c'assified, the 2ank cannot

recoer its 'oan through the sa'e of mortgage

D 9ther genera' causes of poor 'oan recoery:

9ther genera' pro2'em of poor 'oan recoery are gien 2e'o3,

1 0ack ea'uation of technica' and economic feasi2i'ity of the program" De'ay in dis2ursement of credit

.redit is not a''o3ed to actua' entrepreneurs

! 0ack of proper superision

? I''iteracy of 2orro3ers

$ ;egatie attitude of 2orro3ers to repay the 'oan


48/75

@ /ometimes 'oca' 2orro3ers are found to 2e so much compe''ed to grant them 'oan 3ithout proper

study due to some une8pected reasons /ince these 2orro3ers are capa2'e of getting 'oan 2y

e8ercising their inf'uence, they can a'so escape the repayment 'ia2i'ity

C /ometimes 2orro3ers inest their money outside the country Many 2orro3ers transfer 'oan money

to a2road 3here they deposited this money in their o3n account or spent some other purpose

There are some specific reasons for 'oan recoery pro2'ems faced continuous'y 2y /ona'i Bank 0td They

are as:

0oans are gien under fictitious names and enterprise

0oans are gien 3ithout sufficient securities

Approa' of the 'oans in e8cess of the 2ranch manager=s po3er

Improper monitoring and superision of credit

o'itica' misuse if 'oan programs operated 2y the pu2'ic sector 2anks

0ack of time'y action against 3i''fu' defau'ter

0oans are sometimes for economica''y unsound pro5ect

!1? /trategies for Recoery:

Recoery of 'oan can 2e made in the fo''o3ing three methods:

ersuasie

o'untari'y

0ega''y

ersuasie Recoery:

The first step in recoery procedure is priate communication that creates a menta' pressure on 2orro3er

to repay the 'oan In this situation 2ank can proide some adice to the 2orro3er for repaying the 'oan

o'untari'y:

In this method, some steps are fo''o3ed for recoering 'oan These are:

a Bui'ding Task &orce

2 Arranging seminar

c 0oan Reschedu'ing po'icy

d aier of Interest Rate

0ega' Recoery:


49/75

hen a'' steps fai' to keep an account regu'ar and the 2orro3er does not pay the insta''ment and interests

then the 2ank take necessary 'ega' steps against the 2orro3er for rea'iation of its dues In this case, +

Artha Rin Ada'at 0a3 "##- p'ays an important ro'e for co''ecting the 'oan

Findings

As a 'argest commercia' 2ank and the agent of Bang'adesh Bank /ona'i Bank has to do arious

types of 3ork 3ithout thinking a2out the profit &or this reason 3e hae seen that in some cases

2ank has doing 'oss, 2ut this 'oss 3e direct'y cannot say that 2ank fai'ing 'os, this is happening

on'y for he'ping the nation

9n the other hand 3e hae seen that the 2ank profit increasing rate is poor 2ut increasing The

2ank is high'y 'i7uid and earns much profit on o3ner=s e7uity Bank=s operating efficiency is

good >/ is increasing dou2'e per year and earning spread is a'so increasing

/o after a'' 3e can say that as a nationa'ied 2ank commercia' 2ank /ona'i Bank 0imited is a

2ank 3hich is earning 2etter than other nationa'ied 2ank


50/75

?1 Tota' Deposit of /B0

@ear '99,

'99/ '994 '997 '99? '9"9

Total De%osits "@@#@%#

#"## "C%%@" $!C$# !#,$1?1?

!@,C1!1

Gro;t$ Rate of

De%osit

%C?L

%1#L CCL 1#@$L 11!$L

1@@"L

Ta2'e:?1: Trend of Deposit

Gra%$ical Presentation&

2005 200 2007 2008 2009 20100

10000

20000

30000

40000

50000

0000

De"ositBD80

=eposit$)='

&igure6?1:Tota' Deposit


51/75

2005 200 2007 2008 2009 2010

000>

200>

400>

00>

800>

1000>

1200>

1400>

100>

1800>

2000>

9ro:th ate of De"osit

Gro/th ate of =eposit

&igure?":


52/75

2005 200 2007 2008 2009 2010

000

5,00000

10,00000

15,00000

20,00000

25,00000

30,00000

35,00000

Loan + Advances

(oan & ?dvances

&igure?: 0oans * Adances

2005 200 2007 2008 2009 2010

000>

500>

1000>

1500>

2000>

2500>

3000>

3500>

4000>

9ro:th ate of Loans and Advances

Gro/th ate of (oans and

?dvances

&igure?!:


53/75

Interpretation: The 'oans and adances of /ona'i Bank 0imited are increasing year 2y year In

"##? the tota' 'oans and adances 3as Tk "",@##%$ .rore 2ut it 3as increased to Tk "C,$#%C1

.rore in "#1# It means 'oans and adances hae increased 2y Tk?%#CC? .rore from "##? to

"#1# Though there is an up3ard trend in 'oan and adances, its gro3th is f'uctuating oer the

years

,.*& Credit To De%osit Ratio&

.redit to deposit ratio measures the portion of deposit is in the form of 'oans and adances

Credit to De%osit Total Credit 6 Total De%osit

@ear '99,

'99/ '994 '997 '99? '9"9

.redit to DepositRatio

C1%L @%@L $"@"L $!$L $"?!L ?%C!L


54/75

2005 200 2007 2008 2009 2010

000>

1000>

2000>

3000>

4000>

5000>

000>

7000>

8000>

9000>

Credit to De"osit atio

*redit to =eposit atio

Fi!re,.,& Credit to De%osit Ratio

#nter%retation& From t$e fi!re: it $as seen t$at t$e credit to de%osit ratio ;as decreasin!

0ear b0 0ear. (t t$e ratio ;as lo;er in '9"9 from t$ese si 0ears ;$ic$ ;as ,?.7+. e)no; t$at t$e !reater t$e credit to de%osit ratio increase li

" D$a)a Diision '447,.,9 4*.+7

' C$itta!on! Diision *+/+.*9 ?."/

* Ra-s$a$i Diision "*?'."7 *./7

+ K$lna Diision ',+/.4+ /.4*


55/75

, S0l$et Diision */4.?9 9.?4

/ (arisal Diision ,'9.9, ".*7

4 Ran!%r Diision "4"9.9' +.,'

Table ,."9& Trend of area basis loans and adances


9eogra"hical area :ise credit Distribution for -12;1

=ha-a =ivision

*hittagong =ivision

ashahi =ivision

@hulna =ivision

!ylhet =ivision

)arisal =ivision

angpur =ivision

Fi!re,./& Geo!ra%$ical area basis distribtion of loans and adancesB'9"'

#nter%retation& T$e aboe dia!ram s$o;s t$at in '9"' Sonali (an) Limited distribte a

lar!e %ortion of credit in D$a)a Diision S(L distribted 4*.+7 ;$ere ban) distribted

?."/ in C$itta!on! and /.4* in K$lna. #t $as been ie;ed t$at onl0 .?4 of t$eir

!eo!ra%$ical credit distribtion !oes to S0l$et diision and ".*7 !oes to (aris$alDiision and *./7 in Ra-s$a$i diision. Also distribted +.,' in Ran!%r Diision.


56/75

,., E%ort Credit&

@ear '99,

'99/ '994 '997 '99? '9"9

Credit distribtionin e%ort =in Crore>

1%?@$ 1@C1!!# 1@#""!" @%C%C $!!!"# @!1!"%

E%ort Credit as

of total credit

$1!CL @%1L

C"!%L !"@L "?@L

"?%"L

Gra%$ical Presentation:

2005 200 2007 2008 2009 2010

0

2000

4000

000

8000

10000

12000

14000

1000

18000

20000Credit distribution in (!"ort

*redit distribution in #6port


57/75

&igure ?@: .redit distri2ution in >8port

2005 200 2007 2008 2009 2010

000>

1000>

2000>

3000>

4000>

5000>

000>

7000>

8000>

9000>

(!"ort credit as a "ercentage of total credit

#6port credit as a percentage of total credit

&igure ?C: ercentage of .redit distri2ution in >8port

Interpretation: The a2oe graph sho3s that the credit distri2ution in e8port increases year 2y

year In "##?, .redit Distri2ution in e8port 3as Tk1%?@$ .rore 2ut in "#1#, it 3as Tk@!1!"% .rore That means .redit Distri2ution in e8port decreases 2y taka $?!#@ .rore from

"##? to "#1# The e8port credit as a percentage of tota' credit has decreased 2y !$CCL from

"##? to "#1#

?$ Import .redit:

@ear '99,

'99/ '994 '997 '99? '9"9


58/75

Credit distribtion

in im%ort =in Crore>

1"%C!1

C"@%$# CCC1%$ 1$!"#C# %$C$!"

1$!#!"%

#m%ort Credit as

of total credit

?@"#L !?L

!#!L @#CCL C1L

?@!L


2005 200 2007 2008 2009 2010

0

2000

4000

000

8000

10000

12000

14000

1000

18000

Credit distribution in


59/75

2005 200 2007 2008 2009 2010

000>

1000>

2000>

3000>

4000>

5000>

000>

7000>

8000>


60/75


61/75

'997 #C@"1$$%1@ %$!%1%"$$"" ##1%%!1!

'99? !"11###"C! !#$"11$%!##" #1#$$?1$$

&igureB,."'& Crrent Ratio

#nter%retation&The current ratio of /ona'i Bank 'imited has increased from year "##? to "##$

2ut from year "##@ the current ratio is decreasing Again in year "##% ratio is increased That

means it has aerage 'i7uidity position The firm can a2'e to pay its current o2'igations

,.? Cas$ Ratio&

.ash Marketa2'e /ecurities


62/75

.urrent 0ia2i'ities

&igureB,."*& Cas$ ratio

#nter%retation&The cash ratios of /ona'i Bank 'imited for the first years are increasing 2ut in

the year "##C the ratio is 7uite 'o3That indicates the firm has strong 'ines of cash aai'a2'e on

short notice In year "##% again the ratio is increased

,."9 Ealation of O%eratin! Efficienc0&


63/75

;et orking .apita':

.urrent Assets N .urrent 0ia2i'ities

(Taka in Mi''ions)

@ear Crrent Assets Crrent Liabilities Net or)in! Ca%ital

'99, 11!$!1 #%$%"?C ("%C""C"$)

'99/ #C!""" "%#1!##% ("?%"%@C$)

'994 ""!1C? ?%C@"? (#@!?%)

'997 #C@"1$ %$!%1%" (%!#?%@?)

'99? !"11### !#$"11$% ($!1#1$%)

&igureB,."+& Net or)in! Ca%ital

#nter%retation&;et orking .apita' of /ona'i 2ank 0imited for the ? years has sho3n negatie

trend In "##C it 3as highest shortfa'' of net 3orking capita' 4o3eer in "##% the 2ank has

improed its 'ee' of net 3orking capita' But sti'' net 3orking capita' sho3s negatie The 2ank


64/75

shou'd take necessary steps to improe its net 3orking capita' 'ee' 2y turning the negatie

position into positie

,.""#nterest Mar!in&

Interest Income N Interest aid

@ear #nterest #ncome #nterest Paid #nterest Mar!in

'99, 11%$C!??$? 11!1#@?#? ???C#?C"

'99/ 1?%$"C@CCC 1?#%!1#%C! %"!$"%#!'994 C%$"#C%!1 $$"?%#@%% "$$%C?!"

'997 11#1C$1@@! 1%$?%"%#@# (C$!#$@"%$)

'99? 1@$C1#C"" 1?C###"$%% 1CC#C1"C!


65/75

&igureB,.",& #nterest Mar!in

#nter%retation&&or first years, /ona'i Bank 0imited=s Interest margin e8hi2it increasing trend

But in "##C the margin 2ecame negatie 4o3eer in "##% the interest margin position had

improed The 2ank may take necessary steps to improe further the interest margin

,."'Cost of De%osit&

Interest aid S 1##


66/75

Aerage Deposit

@ear #nterest Paid Aera!e De%osit Cost of De%osit =>

'99, 11!1#@?#? "@@#@%#?%C1 !11

'99/ 1?#%!1#%C! #"##1"11 !%@

'994 $$"?%#@%% "C%%@"#%!!1 "#1

'997 1%$?%"%#@# $!C?%@#%1 C

'99? 1?C###"$%% !#$1?1?$%!# C%

&igureB,."/& Cost of de%osit


67/75

#nter%retation&.ost of deposit of /ona'i Bank 'imited in "##$ 3as highest and in "##@ it 3as

'o3est /ona'i Bank 0imited shou'd take necessary steps to mo2i'ie 'o3 cost or no cost deposits

to keep the .ost of deposit at minimum

,."* Retrn on Credit&

Interest income S 1##

?1!Aerage 0oans and Adances:

@ear #nterest #ncome Aera!e Loans and Adances Retrn on credit =>

'99, 11%$C!??$? ""@##%$"#"#$ ?"@

'99/ 1?%$"C@CCC "!1#"%"$C!! $$"

'994 C%$"#C%!1 "#$!@?%"!1 !!

'997 11#1C$1@@! "11$$?@%!$? ?$@'99? 1@$C1#C"" "?!#""?#!$%% $%$


68/75

&igure611@: Retern on .redit

#nter%retation&Return on credit of /ona'i Bank 'imited in "##% 3as highest and in "##@ it 3as

'o3est /ona'i Bank 0imited shou'd take necessary steps to mo2i'ie high return on credit to

keep the return on credit at ma8imum

?1? 9perating rofita2i'ity Ratios:

Retrn on Total Assets =ROA>&

;et rofit 2efore Ta8 S 1##

Tota' Assets

@ear Net Profit After Ta Total E


69/75

&igureB,."7& Retrn on total assets

#nter%retation&Return on Tota' assets of /ona'i Bank 0imited in "##$ 3as 'o3est and after

"##$ the return on tota' assets 3ere increasing That sho3s /ona'i Bank 0imited tries to enhance

their net profit 2efore ta8 generating from assets

,."/ Retrn on E&

;et rofit after Ta8 S 1##

Tota' >7uity

ear Net Pro.t After 8a! 8otal ()uity eturn on ()uity


70/75

=0

1223 208038723 30200000 329

1224 $327534028' $28444370219' .12753

1225 2311114502 21741728899 102

1226 973580120 24417714137 398

1227 153708 30475358113 050

&igureB,."?& Retrn on E


71/75

#nter%retation&Return on >7uity of /ona'i Bank 0imited in "##$ 3as 'o3est and in "##@ the

return on 3as highest /ona'i Bank 0imited shou'd take necessary steps to enhance their net

profit after ta8 using e7uity

Conlusion & Recomendation

Conclsion&

As a 2ank /ona'i Bank 0imited has to do a 'ot of things for the 2etterment of the country The

Bank is strong'y positioned in the market and 3ith its core strengths it can match shareho'ders=

e8pectations and thus raise their 3ea'th in future through ethica' 2anking and 2est pricing Thus,it has to take initiatie so that it can fu'fi'' the desire of the got as 3e'' as peop'e It 3i''

enhance more pu2'ic serices and 2ui'd up 3orking teams to proide the 2est serices to its

a'ua2'e customers It must 2e run in organied 3ay and discip'ine must 2e ensured in a'' sphere

of its performance >fficient e8port team, import team and remittance team must 2e formed and

perform duties proper'y More training, computeriation, data co''ection, market ana'ysis and

s3iftness in sericing are essentia''y re7uired To do these the recommended suggestions can 2e

used A'though it is theoretica' suggestions, it is not a'ue'ess It has great impact on the 2anking

2usiness and other sectors of the economy &or this, got he'p is essentia' and it is e8pected that

got 3i'' 2roaden its hand for imp'ementing the recommendations for the 3e'fare of the peop'e

of Bang'adesh

Recommendation&

The Top management of /ona'i Bank 0imited shou'd 2e more effectie to the emp'oyee then

current situation Because they shou'd take care the 2ranch 'ee' emp'oyee=s

2enefits,opportunities etc The 2ank has high'y ski''ed emp'oyee in the 2ranch 'ee' But the

2ank shou'd 2e a2'e to uti'ie these emp'oyees at appropriate 3ay to take out the 2ank=s output

The 3e2site design is need to improe Therefore, the 3e2site shou'd 2e changed and can put

more information a2out the 2ank The e8isting design cannot capture the customer=s attention

The che7ue=s design is poor The good 'ooking che7ue design can motiate the customer The


72/75

human resource diision can 2e more effectie Because this human resource department shou'd

think a2out the emp'oyee 2enefit much In the training institute, the training process shou'd 2e

used 'atest techno'ogy to proide to the trainee The 2ank shou'd gie training a2out the office

package, 2asic idea on computer and internet In the 2ranch 'ee' 3hen emp'oyees cou'd transfer

to another department during that time that emp'oyee is needed at 'east ten days training

according on the transfer position The higher management shou'd 2e more effectie a2out the

emp'oyee, to take right strategy, right decision makingIn the 2ranch 'ee' emp'oyee is 3orking

so many e8tra time, so management shou'd proide some e8tra incenties to motiate the

emp'oyee9n6'ine 2anking is coming soon so the responsi2'e emp'oyee shou'd 2e trained

effectie'y The training ea'uation process and form is to 2e more moderniedhysica' and

techno'ogica' faci'ities shou'd 2e increased in ea'uating credit proposa's Infrastructure shou'd

2e modernied The cost of fund needs to 2e minimiedThe gap 2et3een emp'oyees and

customers 3i'' 2e reduced through arranging meetingsTota' deposit of /ona'i Bank 0imited:

B


73/75

e kno3 that a'most eery 2ank has its o3n credit procedure >ach * eery 2ank possesses a

standard credit procedure As the purpose of my study is to make a comment on the credit

management of /ona'i Bank 0imited I try my 'ee' 2est to co''ect data for the study and find out

the rea'ity Based on the data generated during my study period I 3i'' sum up my findings here

and I think this 3i'' he'p me to achiee my o25ecties

The tota' deposit of /ona'i Bank 0imited has increased oer the years The gro3th rate of

tota' deposits has a'so increased oer the year in "#1# But, in "##@


74/75

some 2ig c'ients shou'd 2e stopped 4o3eer, the 2ank is 7uite sincere in their approach to

managing the consumer credit though there are rooms for improement They hae to 2e more

cautious in the recordK they fo''o3 an in6depth procedure in assessing the credit 2y using the

credit risk grading techni7ues, 3hich proides them a so'id ground in the time of any sett'ement

&rom the discussion in this report, it has 2ecome c'ear that credit management is a comp'e8 and

ongoing process and therefore financia' institutions must take a serious approach in addressing

these issues They hae to 2e up to date in comp'ying 3ith a'' the re7uired procedures and must

emp'oy competent peop'e 3ho hae the a2i'ity to dea' 3ith these comp'e8 matters tmost

importance shou'd 2e gien to enironment and o2ious'y for efficient and effectie credit

management process

.onc'usion:

/ona'i Bank 0td is much different in any terms Its actiities are ast and in cases uni7ue to any

other 2ank Its deposits and 'oans are huge compared to other 2anks It finances goernment pro5ects,

proides uni7ue serices to peop'e in need, een in p'aces it 3orks as centra' 2ank This Bank often

make decision for the 3e'fare of genera' pu2'ic despite risk of credit e8posure The 2ank has

esta2'ished a sound credit risk management and credit risk mitigation po'icy .omp'iance 3ith Base'

II norms he'ps the Bank to improe their profita2i'ity through 2etter credit risk management systems

&rom the discussion in this report, it has 2ecome c'ear that credit risk management is a comp'e8 andongoing process and therefore Banks or any financia' institutions must take a serious approach in

addressing these issues

Resources :

1) annua' report "#1

") 3e2: 333sona'i2ankcom2d

Recommendation& The fai'ure of commenda2'e 2anks occurs main'y due to 2ad 'oans, 3hich occurs

due to inefficient management of the 'oans and adances portfo'io Therefore any 2anks must 2ee8treme'y cautious a2out its 'ending portfo'io and credit po'icy In the 'ight of the a2oe findings,

fo''o3ing recommendations are proposed:
http://www.sonalibank.com.bd/http://www.sonalibank.com.bd/


75/75

The credit sanction procedure shou'd 2e made 7uicker since competition is ery hard in todayFs2usiness 3or'd eop'e do not 3ant to 3ait for three to four 3eeks on an aerage to get a 'oan 3hich

is een protected 2y security

Decision making process can 2e made more decentra'ied

The 2ank shou'd emphasie on reducing the c'assified and non6performing credits 2y concerted

effortsIn the credit department, strict superision is necessary to aoid 'oan defau'ters Bank officia'

shou'd do regu'ar isit to the pro5ects

.entra' monitoring system shou'd 2e more actie to maintain c'assified 'oan to a minimum 'ee'

&i'ing is a ery important component of proper documentation It has to 2e dea't 3ithimportance

/a'ary sca'e shou'd 2e increased to motiate e8treme'y dissatisfied emp'oyees and to reduce

misconduct

au'ts security shou'd 2e increased

To attract more c'ients shou'd sought ne3 marketing strategy

An uninterrupted net3ork system has to 2e ensured It 3i'' sae the officia's from much hass'eand 3i'' sae time

o'itica''y inf'uenced 0ending or pro5ect finance shou'd 2e checked

Reslts and Discssion&

The Resu'ts(findings) of this study are summaried 2e'o3:

The credit risk management process of /ona'i Bank 0td is 7uite commenda2'e /ystematic and

time'y monitoring and appropriate documentation are tried to 2e maintained

.ustomer satisfaction 'ee' is 7uite good Informa' conersation 3ith some customers reea's

that they approe the credit ea'uation and management process of /ona'i Bank 0td