credit management operation of agrani bank

Chapter-01

INTRODUCTION

1.1 Introduction

Bangladesh is the nature’s darling child with a vast possibility of massive improvement

of its economy. In an economy like this, banking sector can play a vital role to improve

the overall socio–economic condition of the country. The banks by playing the role of an

intermediary can mobilize the excess fund of surplus sectors to provide necessary

finance, to those sectors, which are needed to promote for the sound development of the

country. The motives of banks are profit-earning. The word ‘Bank’ refers to the financial

institution that deals with money transaction. Banks collect deposits at the lowest

possible cost and provide loans and advances at highest cost. The spread between the two

is the profit for the bank. Commercial banks are primary contributors to the national

development of the country. The revenue earning sources of banks are mainly loans and

advances. The credit facility can be of two types: funded and non-funded. Funded credit

can be expensive for the banks, as the bank has to pay interests. Non-funded credit

includes Letter of Credit, Foreign Guarantee, Bank Guarantee, Remittance etc.; these are

the main source of income for the foreign exchange business. If a bank can increase its

import and export transactions, its profit will obviously reach a higher level, as the costs

are negligible. Agrani Bank Limited deals with money transaction as well as it deals with

the customers. This report represents how the employees of Agrani Bank Limited deal

with the customers of their bank.

1.2 Objective of the Study

Project Objective

Presenting and Emphasizing on credit operation, credit risk management and credit

performance including the credit payment system.

Secondary objective

To evaluate overall performance of The Agrani Bank Ltd.

To gain practical knowledge in the banking sector.

To appraise the actual Recovery position of the Agrani Bank Ltd.

To evaluate the success of credit operations compare with other Banks.

To identify problems in credit operations of Agrani Bank Ltd.

To analysis the Lending procedures maintained by the Agrani Bank Limited.

To observe principal Lending activities of Agrani Bank Limited.

To measure the actual position in classified Loan and provisions maintained by

the Agrani Bank Ltd.

To recommend suggestions for the successful Lending Operations of Agrani Bank

Ltd.

1.3 Sources and Methods of collecting data

For preparing this paper, I used both Secondary and Primary data.

• Collection of Primary Data:

Many of the data and information were collected from my practical experience.

Experience queries from the executives while doing my internship at The Agrani

Bank Ltd.

Information and data regarding Overview of the Agrani Bank Ltd.

Interviewing officers and staffs.

Direct communication with the clients.

• Collection of Secondary Data:

Annual Reports.

Brochures, Manuals and Publication of the Agrani Bank Ltd

Internet and websites.

1.4 Methodology

The study is performed based on the information extracted from different sources

collected by using a specific methodology. There are various methods of conducting such

studies. This report is analytical in nature. The methodology is:

Population:

All the Branches of Agrani Bank Ltd. located in everywhere in Bangladesh has been

taken into consideration as population.

Sample:

Agrani Bank, Sonargoan Road Branch Client is the vivacious sample. Employee of that

branch is also sample of this report.

Two approaches have been mainly used in this report:

A) Empirical Approach: This refers to the information that has been directly collected

and interpreted from the survey on Agrani Bank Ltd. The report is prepared by

interviewing the officials of The Agrani Bank Ltd. The reports of Agrani Bank Ltd and

documents are also been studied to do the report.

B) Conceptual Approach: A theoretical section is given in this report (i.e. the

organization part) to give an insight to the various information concerning the operational

function. It is given in relevance with the organization in context i.e. Agrani Bank Ltd,

Sonargoan Road Branch,Dhaka. Every single portion is discussed in order to understand

the empirical section.

1.5 limitations of the Study

Data are not available in a systematic way.

The duration of the internship is only 3 months (12 weeks) is not enough for the

study

The authorities were unwilling to provide data because of confidentiality of the

organization.

Chapter-02ABOUT THE ORGANISATION

2.1 A Brief Overview of Agrani Bank Limited:

Agrani Bank Limited, a leading commercial bank with 879 outlets strategically located in

almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and

hundreds of overseas Correspondents, came into being as a Public Limited Company on

May 17, 2007 with a view to take over the business, assets, liabilities, rights and

obligations of the Agrani Bank which emerged as a nationalized commercial bank in

1972 immediately after the emergence of Bangladesh as an independent state. Agrani

Bank Limited started functioning as a going concern basis through a Vendors Agreement

signed between the ministry of finance, Government of the People's Republic of

Bangladesh on behalf of the former Agrani Bank and the Board of Directors of Agrani

Bank Limited on November 15, 2007 with retrospective effect from 01 July, 2007.

Agrani Bank Limited is governed by a Board of Directors consisting of 13 (thirteen)

members headed by a Chairman. The Bank is headed by the Managing Director & Chief

Executive Officer; Managing Director is assisted by Deputy Managing Directors and

General Managers. The bank has 11 Circle offices, 25 Divisions in head office, 62 zonal

offices and 879 branches including 27 corporate and 40 AD (authorized dealer) branches.

2.2 History of Agrani Bank Limited

The banking world has been undergoing rapid and fundamental changes. The speed of

these changes has been maintained even after the global financial turmoil experienced

during the past few years. It is well recognized that there is an urgent need for better-

qualified management and better-trained staff in the dynamic global financial market.

Bangladesh is no exception of these angles though its prospect is bright in the future.

Agrani Bank is one of the most important nationalized commercial bank with 879 outlets

strategically located in almost all the commercial areas throughout Bangladesh, overseas

Exchange Houses and hundreds of overseas Correspondents came into being on March

26, 1972 with the promulgation of Presidential Order no 26 of 1972. Under the Order

Agrani Bank took over assets and liabilities of the rest while Habib Bank Ltd. and

Commerce bank Ltd. functioning in the then East Pakistan. The bank enjoys the status of

the company and functions in terms of the Banking Company Ordinance and Regulations

of Bangladesh Bank

(The Central Bank) and upon such directions as may be changed from time to

time by the Government of the People’s Republic of Bangladesh. The Bank, in 1972,

started operation with only 249 branches with its Head Office in Dhaka. There was

hardly any liquid asset to run the operation of the Bank smoothly. The bank resumed its

operational activities with an authorized capital of Tk. 5.00 core and paid-up capital of

Tk. 1.00 core. Initially the Bank had deposit of Tk. 96.17 core, advances of Tk. 76.56

core, borrowings of Tk. 29.48 core and investment of Tk. 11.00 crore. The bank had

commercial relationship with only 41 overseas correspondents in 1972.

In the initial phase, the bank undertook steady expansion programs all over the

country by opening new branches, particularly in the rural areas, with a view to extending

banking services to the doorsteps of rural people..

2.3 Key Features of Agrani Bank Limited

MISSON

To become a leading bank of Bangladesh operating at international level of efficiency,

quality and customer service.

VISION

We operate ethically and fairly within the stringent framework set by our regulators. We

will go fusing ideas and lessons from best practice to explore new avenues to stay

stronger and more efficient and competitive. We will apply information and

communication technology for the benefit of our customers and employees. We will

invest to strengthen the future of the Bank.

MOTTO

To adopt and adapt modern approaches to stand supreme in the banking arena of Bangladesh

VALUES

We believe in integrity, transparency and accountability, and also value professionalism

that will provide a high standard of service to all our customers and stakeholders.

2.4 Organizational Hierarchy of Agrani Bank Limited

2.5 Strategic Objective of Agrani Bank Limited

Winning at least 6 per cent share of deposits and 4.5 per cent share of loans and

advancesof Bangladeshi market.

Gaining competitive advantages by lowering overall cost compared to that of

competitors.

Overtaking competitors by providing quality customer service.

Achieving technological leadership among the peer group.

Strengthening the Bank’s brand name appeal.

Contributing towards the economic well-being of the country by focusing

particularly on

SME and agricultural sectors.

Strengthening research capability for innovative products.

2.6 Ethical Standards of Agrani Bank Limited

Be Trustful: We believe in mutual trust and trust our customers in a way they can

trust us.

Keep An Open Mind: For continuous improvement of our bank we keep our

minds open tonew ideas. We seek opinions and feedback from both customers

and team members through which our bank will continue to grow.

Meet Obligations: Regardless of the circumstances, we do everything to gain the

trust and confidence of customers and clients by honoring our commitments and

obligations.

Be Transparent: We are transparent in our dealings with customers and all

stakeholders. We reevaluate all print materials including advertising, brochures,

and other business documents making sure that they are clear, precise and

professional

Be involved with the Community: We remain involved in community-related

issues and activities, thereby demonstrating that our business is a responsible

community contributor.

Be Respectful: We treat all stakeholders with utmost respect and courtesy

regardless of differences, positions, titles, ages, or other types of distinctions.

2.7 Role of Agrani Bank in General

After the emergence of Bangladesh, the banking system has expanded to a lot in the last

three decades. Though many private commercial banks have been established, the major

portion of banking business is covered by the four nationalized commercial banks such

as: Sonali, Janata, Agrani and Rupali Bank Ltd.

Agrani Bank plays an important role in our national Economy. It includes so

many types of services and functions. The key roles of Agrani Bank Ltd are as follows:

It helps to secure deposit.

It inspires for savings.

It provides loans and Advances for several purposes.

It provides several services to the customers.

It helps to the formation of capital.

It helps for international trade.

It helps to perform foreign exchange activities.

It acts as an advisor.

It helps to transfer money.

It helps for collecting receipts, interests, dividends, rents, pensions etc.

Apart from common lending activities, Agrani Bank is involved in various programs to

disburse credit to the rural people. Actually Agrani Bank is a state owned bank; the

people in general have every right to know how well their money is utilized. Financial

activities and expenditures of Agrani Bank are increasing over the time. It is vital to

know that how the expenditures relate to income of the bank. More specifically how far

the increased expenditures over the years are justifiable in consideration of induced

changes in income.

2.8 Services of Agrani Bank Limited

i. Cash service

ATM Service

Cheque Encashment

Foreign Currency

ii. Fund Transfer

On line Banking(CBS)

Inter Bank Money Transfer

Swift

Telegraphic Transfer

Issuing & Enchasing Foreign Draft

iii. Value Added Service

Locker Services

Agency Service

Inland Remittance

2.9 Core Business of Agrani Bank Ltd.

1) Account & Deposit

Current Account

Call deposit

Agrani Bank Shilpo Unnaya Bond

Cash Credit (Hypo)

Cash Credit (Pledge)

Secure Overdraft(SOD)

Temporary Overdraft (TOD)

Industry Credit (IC Export Cash Credit

2) Trade Finance

3) Import Finance

Loan Against Imported Merchandise (LIM)

Loan Against Trust Receipt (LTR)

Loan Against Export Development Fund (EDF)

Payment Against Document (PAD)

4) Export Finance

Export Cash Credit

Pre-Shipment Credit

Packing Credit

5) Islami Banking

Mudaraba Savings Account

Mudaraba Mohor deposit Scim

Mudaraba Hajj Sanchay Prokolpo

Islami Banking Window

2.10 Performance of Agrani Bank Ltd:

2.10.1 Deposits:

At the end of December, 2011the deposit of the Bank was Tk. 43714.18 million compared to Tk. 36982.05 million at the end of previous year.This growth rate is a remarkable achievement, considering the adverse economic scenario of the country during the year under review.This figure shows that Deposits of Agrani bank ltd has increased over the periods.

Table deposits of Agrani Bank ltd

Types 2011(million)

2010( million)Current deposits and other accounts: 43714.18 36982.05Bill payable 5093.32 4000.21Saving bank deposits 85320.75 80130.88Fixed deposits 118080.1 85212.85

Source: Annual report of Agrani Bank Ltd 2011, 2010, 2009.

2.10.2 Investment

Agrani Bank Ltd invests it’s deposits in different sectors. It is the important way for the bank to earn income because from investment bank earn interest. This figure shows that investment of Agrani bank ltd has increased over the periods. For example, in 2010 current deposits was less than 2011.

Year Investment(in million)2011 43916.292010 85331.252009 43916.29

Source: Annual report of Agrani Bank Ltd 2011, 2010, 2009.

2.10.3 Operating income

Oerating income reresents the strength of bank. These table and grah shows the

increasing amoun of oerating income . At the end of December 2011the operating

income of the Bank was Tk. 2146.66 million compared to Tk. 16930 million at the end of

previous year.

Types Operating income( in million)2011 21046.662010 16930.212009 16930.21

2.11Brief profile of Sonargoan Road Branch

The Agrani Bank Limited. plays a very important role in financial sector with 879

branches all over the country. In Sonargoan Road Branch commercial services are such

as Loans and advances, Foreign Exchange General banking service are provided here.

Branch is directing, controlling and doing its business by a SPO with so many energetic

officials. It has 3 departments:

1. General Banking Section

2. Loan & Advances Section

3. Foreign Exchange Section

My report highlighted “Credit Management Operation” is based on Loan & Advance

Department of Sonargoan Road Branch

Chapter-03

CREDIT MANAGEMENT

3.1 Introduction to Credit

The word ‘credit’ derives from Latin word ‘crudere’ means ‘to trust’. The fundamental

nature of credit is that, an element of trust exists between buyer and seller whether of

goods or of money. Credit may also be defined narrowly or broadly. Narrowly credit is

simply the opposite of debt. Debt is the obligation to make future payments. Credit is the

claim to receive these payments. Credit is finance made available by one party (lender,

seller or shareholder/owner) to another (borrower, buyer, corporate or non-corporate

firm), i.e. from surplus unit to deficit unit. Credit is the outcome of financial

intermediation the very major service offered by Bank financial institution.

The economic basis of financial intermediation lies in the economies of scale in

portfolio management and in the law of large numbers.

Lenders have preference for financial intermediation because of:

Greater liquidity

Convenience and

Low risk

Other auxiliary services.

Borrowers have preference for financial intermediation because of:

The rate of interest charged is generally lower than that charged by other lenders.

Regulated financial institutions do not fleece small borrowers in the manner

moneylender do.

Availability of big pool of funds that can satisfy big individual demands.

Greater certainty of the availability of funds at all times. Broadly, credit is finance

made available by one party (lender, seller) to another party (borrower, buyer).

3.2 Importance of Bank Credit (Micro and Macro Aspect)

One of the primary functions of commercial banks is sanctioning of credit to the potential

borrowers. Bank credit is an important catalyst for bringing about economic development

in a country. Without adequate finance there can be no growth or maintenance of a stable

economy. Bank lending is important for the economy, for it makes possible the financing

of agriculture, commercial and industrial activities of a nation. At the same time, a bank

will, therefore, distribute its funds among various sectors in a manner as to derive

sufficient incomes.

At Micro Level:

Credit influences the behavior of economic sector (Industry, Agriculture etc.) and

the behavior of economic agents (Business Firm, Financial Institution, Household etc.).

At Micro Level:

There are two-way relationships between credit and deposit.

Delivery of credit is the core function of banks and interest on credit constitutes

the major part of bank income.

Credit is important to business and industrial firm. Banks provide financing for

import, working capital and investment etc.

Credit is important to agriculture. Bank provides crops loan and financing for

agro-based business and for investment.

Credit is important to household. Since it enables them to incur expenditure in

excess of income in a given time period. Thus credit supplements savings.

At Macro Level:

Credit influences and is influenced by quality of money supply, level of economic

activity or GNP, imports, exports and net foreign assets.

At Macro Level:

Credit provides vital linkage among government sector, private sector, financial

sector and foreign sector.

Credit is an important determinant of money creation and enhances of production,

consumption and national income.

Credit influences imports and capital movement and enhance the outcome of

balance of payment. Excessive credits can lead to inflation, over importation,

capital flight and balance of payment deficit.

3.3 Target Customers of Agrani Bank limited,

The customers for loan service are categorized as follows:

i. Individual person.

ii. Sole proprietorship firm.

iii. Partnership firm.

iv. Private Limited Company.

v. Public Limited Company.

vi. Government and semi Government Organization. Bank employee.

3.4 Importance of Credit Policy

Bank can maintain regulatory standard in maintaining loan to the customers.

Bank can make sure the profitability of the loan.

Loan policy give loan officer and bank management specific guidelines in making

individual loan decision and shaping the banks overall portfolio. Bank loan

portfolio should reflect what the loan policy says.

3.5 Elements of a Good Credit Policy

1. Goal Statement: A goal statement must contain the size, types, maturity

and quality of the loan.

2. Specification of the Lending Authority i.e. Maximum loan limit, Loan

giving capacity.

3. Line of Responsibilities: Responsibility of the officers of credit of credit

department (Term of preference: TOR)

4. Operating Procedure for;

Soliciting

Reviewing

Evaluating and

Making decision on customer loan application

5. Documentation: Which document should be taken for each loan?

6. Line of Authority: It says who is responsible for maintaining and

reviewing the credit file document.

7. Guidelines for taking, evaluating and perfecting loan collateral.

8. Policy and procedure for setting interest rates and fees and the terms for

repayment of loans.

9. A statement of quality standards applicable to all loans.

10. A statement of loan limits policy.

11. A description of the banks principal trade area.

12. A statement of the preferred procedure for detecting, analyzing and

working out problem loan situation.

13. Policy guidelines for rehabilitation of seek project of non-performing loan

or rescheduling of loan.

3.6 Lending Principles Followed by Agrani Bank

As liquidity and profitability are conflicting considerations, Agrani Bank, Branch, Dhaka

as a bank, while employing the funds pays due regard to both profitability and liquidity.

In order to secure a balance between liquidity, profitability and security, Agrani Bank

follows the following principles of sound lending -

Liquidity: It means that while lending, adequate care has to be taken so that

the liquidity is not compromised. That’s why, Agrani Bank chooses such

securities which posses sufficient liquidity.

Safety: Agrani Bank exercises the lending function only when it is safe and

that the risk factor is adequately mitigated and covered. Safety depends upon –

a) The security offered by the borrower; and

b) The repaying capacity and willingness of the debtor to repay the loan with

interest.

Diversity: In order to minimize risk, Agrani Bank invests its funds

in different types of securities of different industries situated in different regions

of the country.

Yield: From the commercial point of view, Agrani Bank considers

sufficient yield or return while financing a project.

Productive Purpose: Agrani Bank exercises its lending function

only on productive purpose.

3.7 Types of Loans and Advances Offered by Agrani Bank

Agrani Bank offers following types of loans and advances-

a) Secured Overdraft (SOD)

b) Cash Credit (CC)

c) Staff Loan

d) House Building Loan

e) Transport Loan

f) Mid-term Loan

g) Bills Purchased and Discounted

h) Industrial Credit.

3.7.1 Secured Overdraft (SOD)

It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. Agrani Banksanctions SOD against different security. Based on different types of security, we can divide SOD in the following categories-

Fig.: Types of Secured Over Draft

Source: Official Records of Agrani Bank, Sonargoan Road Branch, Dhaka

1. SOD (General): Advances allowed to the individuals/firms against financial

obligations i.e. lien of F.D.R. or Defense Savings Certificate (P.S.P), ICB Unit Certificate

etc.

2. SOD (Others): Advances allowed against assignment of work order for execution of

contractual works falls under this head. The advance is generally allowed for a specific

purpose. It is not a continuous loan.

3. SOD (Export): Advance allowed to purchasing foreign currency for payment against

L/Cs (Bank to Back) where the exporter cannot materialize before the date of import

payment.

SOD (General)

SOD (Others)

SOD (Export)

Secured Over Draft (SOD)

The processes of extending SOD are as follows –

a. The party must have a current account with the branch

b. If the ownership of the firm is proprietorship, then a trade license must be

submitted and in case of a limited company, all the documents required to open a current

account should be submitted. The financial statements of the concerned firm should also

be submitted.

c. The party must maintain a good transaction with the branch and have a

good turnover rate.

d. The party will apply to the officer in charge of credit department of the

branch for SOD arrangement

e. The concerned officer of the branch will give him a Credit Application

Form and the party will have to fill up this form. In this form he discloses all the

information about his concern, purpose of the loan, description of security, etc.

f. The concerned officer will prepare a “Credit Line Proposal”, where he

writes about the business concern, details of proprietors/directors of the concern,

management structure, and the existing credit facilities, the particulars about the facilities

that asked for – such as margin limit, date of expiry, details of security, and any other

relevant information. Then the proposal is sent to the Head Office, General Advances

Division for approval.

g. The responsible Department of the General Advances Division will

appraise the proposal and if it seems to a viable then the loan will be sanctioned.

h. After the loan is sanctioned, the branch will issue two copies of a sanction

advice, where all the terms and conditions set by the bank is mentioned. The borrower is

advised to write, “accepted” on the original copy if he is satisfied with the terms and

conditions of the bank and retain the duplicate one as record.

3.7.2 Cash Credit (CC):

Cash Credit (CC) is an arrangement by which a banker allows his customer to borrow

money up to a certain limit. CC is a favorite mode of borrowing by traders, industrialists

etc. for meeting their working capital requirements. It is operated like overdraft account.

Depending on the needs of the business, the borrower can draw on his cash credit account

at different time and when he gets money can adjust the liability. Agrani Bank Limited

charges interest on the daily balance in the account. Depending on charging security there

are two (02) forms of cash credit

1) Cash Credit (Hypothecation):

2) Cash Credit (Pledge)

Cash Credit (Hypothecation):

The mortgage of movable property for securing loan is called hypothecation.

Hypothecation is a legal transaction whereby goods are made available to the lending

banker as security for a debt without transferring either the property in the goods or either

possession. The banker has only equitable charge on stocks, which practically means

nothing. Since the goods always remain in the physical possession of the borrower, there

is much risk to the bank. So, it is granted to parties of undoubted means with the highest

integrity.

Cash Credit (Pledge):

Pledge is the bailment of goods as security for payment of a debt or performance of a

promise. Bailer in this case is called the “Pawnor” and the bailee is called the “Pawnee”.

In a contract of pledge, Pawnor must deliver the goods to the Pawnee either actually or

constructively. Transfer of possession is the judicial sense, is essential in the valid pledge.

In case of pledge goods the bank acquire the possession of the goods or a right to hold

goods until the repayment for credit with a special right to sell after due notice to the

borrower in the event of non-repayment.

The processes of opening a CC account are shown in the following flow chart-

The processes of opening a CC account

The interested party must have a current account and good transaction with the branch

Applies for CC pledge or hypothecation arrangement

Fills up the “Credit Application Form” as provided by the respective officer

The concerned officer prepares a “Credit Line Proposal” (CLP) detailing all relevant information

Sends the CLP to the Head Office, General Advances Division for necessary action

Head Office, General Advances Division examines the proposal and if finds it viable then sanctions it and sends it to the branch

The branch issues two copies of “Sanction Advice”, one for its own record and the other for the party to keep.

Source: Official Records of Agrani Bank, Sonargoan Road Branch, Dhaka

4.7.3 Staff Loan:

Agrani Bank Limited provides advances to the staffs for buying motorcycles and

bicycles, for wedding of their sons or daughters etc. It is called “Staff Loan”. Bank

provides this advance facility under installment system. At the end of each month, when

the staffs used to withdraw their salaries, bank takes a fixed amount from the salary of

each of the concerned staff that takes this loan.

4.7.4 House Building Loan:

House Building Finance Corporation (HBFC) is the main institution to meet the

requirement of loans in this field but Agrani Bank Limited also supplement to this sector.

Advances for construction of residential houses against real estates as primary securities

as allowed by banks. Agrani Bank Limited may grant advances for construction of

commercial building also against real estates.

3.7.5 Purchase and Discount of Bills:

Purchase and Discount of Bills is also a special form of advances Agrani Bank

normally purchase demand bills of exchange that are called “Drafts” accompanied by

documents of title to goods such as Bill of Lading, Railway of Truck receipt. The

purchase of bills of exchange drawn at an issuance, i.e., for a certain period maturing on a

future date and not payable on demand or sight is termed as discounting a bill and the

charge recovered by Bank for this is called “Discount”.

3.7.6 Mid-Term Loans:

Agrani Bank Limited or other commercial banks, because of their capital

structure, constitution and liquidity consideration, are advancing for short term on

principle. But modern banks have stated lending a safe proportion of their demand and

time liabilities for fairly long periods to House Building, Industrial, Agricultural,

Transport and many other sectors. Such loans are repayable by installments over a

number of years ranging from 2 to 12 so far as, nature and conduct are concerned.

3.7.7 Transport Loan:

Advances are allowed against hypothecation of “Power-Driven Vehicles” (PDV)

including water crafts for genuine transport business to sufficient credit parties at 30%

margin and suitable guarantee from persons of sufficient and standing where considered

necessary mortgage of urban immovable property, registered or equitable, are also to be

obtained by way of additional securities or in suitable case. In case of acceptance of

mortgage, the minimum margin may be reduced up to 10 percent. These loans should be

repayable within maximum period of two years, which is subject to renewal with

approval from Head Office.

3.8 Procedures for Giving Advances

The General Advances Department of Agrani Bank Limited, Sonargoan Road Branch,

Dhaka, usually follows the below-mentioned procedures and steps for sanctioning any

kind of advances as available with the branch-

In the first step, the prospective borrower has to apply to Agrani Bank Limited,

Sonargoan Road Branch, Dhaka for loan by filling up of a specific Application form. The

Application form (Request for Credit Limit) contains following particulars-

Name of the Borrower

Account No.

Business address (with telephone no.)/Residential address and Permanent address

Introducer’s name, A/C no. and address

Date of establishment/ Incorporation

Trade license number, date and expiry date (Photocopy of trade license enclosed)

GIR/TR no. and amount of income tax paid last year

Constitution/Status (Mention whether sole proprietorship/ partnership/ Public Ltd.

company/ Private Ltd. company).

Particulars of Individual/ Proprietor/ Partners/ Directors (Name and Designation,

Father’s/ Husband’s name, present and permanent address with Telephone no., %

of shares held)

Experience and background of Individual/Proprietors/ Partners/Directors

Full particulars of assets in the personal name of Individual/ Proprietor/Partners/

Directors with valuation

Names of Subsidiaries/Affiliates, percentage of share holding and nature of

business

Nature and details of business/products (for which credit facility is applied for),

Markets (Present market price per unit, Factory price), Estimated sales for next

one year.

Credit facilities required (type, amount, period, purpose and mode of adjustment)

Details of securities offered with estimated value (Primary security, Collateral

security, market value of the security)

Details of liabilities in the name of the client or in the name of any other

Partners/Directors or Subsidiaries/Affiliates with Agrani Bank Limited and other

banks, if any (Name of the Bank, Account no., Nature of advance, amount,

security and validity of limit)

Balance Sheet/Income Statement or Statement of Accounts of the following years

attached (Preferably last 3 years)

Other relevant information

Proposed debt/equity ratio

Signature of the Applicant

In the second step after receiving the loan application form Agrani Bank Limited,

Sonargoan Road Branch, Dhaka, sends a letter to Bangladesh Bank for obtaining a report

from there. The purpose of this report is to being informed that whether the borrower has

taken loan from any other bank; if ‘yes’, then whether these loans are classified or not.

In the third step, after receiving CIB report if the Bank thinks that the

prospective borrower will be a good borrower, then the bank will scrutinize the

documents. In this stage, the branch will look whether the documents are properly filled

up and signed.

In the fourth step, i.e., the processing stage, the branch will prepare a Proposal. A

proposal contains following relevant information –

Name of the Borrower

Nature of Limit

Purpose of Limit

Extent of Limit

Security

Margin

Rate of Interest

Repayment

Validity

The branch incumbent has the discretionary power to sanction loan (SOD) up to

Tk.25 lac against financial obligations by informing Head Office. But in that case, the

DGM of the branch has to give attention to the following matters-

The interest rate of the loan must not be less than 14.5%; and

The borrower must maintain 30% margin.

Except this case, the branch has to send the proposal to the Head Office. Head

Office will prepare a minute and submit it before the Executive Committee (EC).

The minute has to be passed by the EC. After passing the minute, it will be sent

to Bangladesh Bank for approval in case of the following-

If the proposed limit exceeds 20% of bank’s equity

If the proposed limit against cash collateral securities exceeds 25% of banks

equity.

After getting the approval from Bangladesh Bank, it will again come to the Head

Office. The HO then prepares a “Sanction Advice” and sends it to the branch. A

Sanction Advice usually contains the following particulars amongst other details-

Name of borrower

Facility allowed

Purpose

Rate of interest

Margin

Period of the loan and mode of adjustment

Security

Security

Other terms and conditions.

The borrower receives the advice and returns a copy of this letter duly signed by him

as a token of having understood and accepted of the specified terms and conditions.

In the fifth step, after receiving the sanction advice, the branch will collect

necessary documents. Documents mean any written record, which serves as evidence in

respect of a transaction and may be described as anything that is obtained for recording a

transaction. Documentation is a very important aspect of loans and advances. It may be

described as the process or technique of obtaining the relevant documents/papers for

securing advances. A banker must obtain proper documents to be executed by the

borrower to protect the Banks interest. Moreover, when money is lent against security of

some assets, the document must be got executed in order to give to the banker a legal and

binding charge against those assets. The documents for loans and advances can be

classified into the two categories namely charge documents and security documents.

Charge Documents are a set of printed and prescribed forms, which are executed by the

borrowers to protect Bank’s interest while bank is providing loan/advances. Different

types of advances are allowed to the customers against different types of securities. All

securities are not suitable for all types of advances. There is common type of charge

documents for types of advances. These are as follows-

Demand Promissory Note

Letter of Arrangement

Letter of Disbursement

Balance Confirmation Certificate

Specific types of charge documents are required for Commensuration types of

securities/ facilities. The types of advances made by the Agrani Bank Limited, Sonargoan

Road Branch, Dhaka, to its customers and probable securities offered by them are listed

below-

Types of Advances Probable Securities

LAOSLien of various kinds of Sanchaypatras, Government. Securities, Debentures etc

LSM Mortgage of Immoveable Properties

LIM Pledge of Imported Merchandise

TR Trust Receipt obtained in lieu of Import Documents

Secured Overdraft Sanchaypatra, Non-resident Foreign Currency Deposit (NFCD) etc.

Cash CreditPledge or Hypothecation of stock in trade, Goods produce and merchandise

LAFB Shipping Document for Export

FDBP Shipping Document for Export

LBP Bank’s Acceptance

PAD Shipping Documents for Import

Source: General Advance Dept. Agrani Bank Limited, Foreign Exchange Corporate Branch,

Dhaka.

In the sixth step, after verifying all the documents the branch disburses the loan to the

borrower. A “Loan Repayment Schedule” is also prepared by the branch and is given to

borrower.

In the seventh step, after the disbursement of the loan the bank follows the borrower in

the following manner-

Constant supervision

Working Capital assessment

Stock report

Break Even analysis

Rescheduling of repayment

In the eighth step, the loans are repaid in installment. This installment is according to

bank directives. Some loans are repaid all at a time. If any loan is not repaid then notices

served to the customer. Sometimes legal actions also taken for recover the loan.

3.9 Credit Risk Analysis

Credit Risk Analysis is a technique by which the risk of the loan is calculated.

Experienced people of General Advance Department in Agrani Bank, Sonargoan Road

Branch, Dhaka., do this analysis. It is a ranking which total score are 100.

Credit Risk Grading Score sheet:

Grading Short Score

Superior SUP Fully cash secured, Secured by govt./Int. Bank Guarantee

Good GD 85+

Acceptable ACCPT 75-84

Marginal / Watch list MG/WL 65-74

Special Mention SM 55-64

Substandard SS 45-54

Doubtful DF 35-44

Bad and Loss BL < 35

Source: Advance Dept. Agrani Bank Sonargoan Road, Branch, Dhaka

In Credit Risk Analysis, following aspects are analyzed-

A. Financial Risk -

Leverage

Liquidity

Profitability

Coverage

B. Business / Industry risk -

Size of business

Age of business

Business outlook

Industry growth

Market competition

Entry / Exit barriers

C. Management risk -

Experience

Second line / Succession

Team work

D. Security risk -

Security coverage (Primary)

Collateral coverage (Property Location)

Support (Guarantee)

E. Relationship Risk -

Account Conduct

Utilization of limit (Actual/ Projection)

Compliance of Covenants / Conditions

Personal deposits.

3.10 Types of Security

Agrani Bank Limited, charges the following two types of security-

1. Primary security

2. Collateral security.

The modes of charging securities usually followed by the branch are as follows-

Pledge

Hypothecation

Lien

Mortgage

Lien: Lien is the right to retain possession and not right of ownership. Banks lien is

general lien over its own financial obligation to clients. Property under lien cannot be

realized/sold and proceeds thereof cannot be appropriated without notice to the owner

and sometimes without court’s order.

Hypothecation: This is mortgage of moveable by an agreement and here neither

possession nor ownership is transferred. Hypothecated goods cannot be sold out/disposed

off without notice and court’s order. However, if a special power of attorney is taken in

that case can be disposed off without going to the court.

Pledge: Pledge is the bailment of goods as security for payment of a debt or performance

or promise. Here, title and ownership are not transferred. Pledge goods may be sold out

and proceeds thereof may be appropriated towards adjustment of Liability in case of

failure of the borrower to repay or fulfill the terms and conditions.

Mortgage: Mortgage is the transfer of interest in immoveable property to secure the

repayment of money advanced. Ownership remains with the mortgagor. In case of

equitable mortgage Court Order is necessary and in case of registered mortgage Court’s

order is not necessary for sale/disposal of the mortgaged property for adjustment of

advance.

3.11 Common Methods of Charging Security and Their Nature of

Security

Mode Nature of security and its characteristics

Lien

a. Cash, cash collateral and documents of the title to the goods

b. It is the right of banker to hold the debtor’s property until the

debt is discharged – generally retained by the bank in its own

custody or to the hands of third party with lien marked.

c. The third party cannot discharge it without the permission of

the bank.

d. In case of need bank needs the permission from the court to

sell the property

Assignment

a. Borrower transfers the right of property or debt to the bank

Life insurance policies, supply bills, book debt of the borrower

can be assigned

Pledge

a. Moveable stock of raw material, finished goods,

merchandise

b. Pledge is also lien but here bank enjoys more right.

c. Physical transfer of goods to the bank is must.

d. Bank can sell the property without the intervention of any

court, in case of default on loan.

Hypothecation

a. Moveable stock of raw materials finished goods,

merchandise.

b. Goods remain in the hands of debtor, but documents of title

to goods are handed over to the banker. This method is also

called ‘equitable charge’.

c. Bank inspects the goods regularly to judge it’s the quality

and quantity for the maximum safety of its loan.

Mortgage

a. Mortgage is the transfer of specific immovable property –

like land, building, plant etc.

b. Most common type of mortgage is legal mortgage in which

ownership is transferred to the bank by registration of the

mortgage deed.

c. Another method called equitable mortgage is also used in

bank for creation of charge. Here mere deposit of title to goods

is sufficient for creation of charge. Registration is not required.

In both the cases, the mortgaged property is retained in the

hand of borrower.

Trust receipt

a. Intangible asset (goodwill)

b. It is used in foreign exchange business – it will be discussed

thereon

3.12 Loan Classification Procedure

3.12.1 Importance of Loan Classification:

Loan classification attempts to categorize the debt information in a systematic

manner. Loan classification is defined in terms of degree of risk associated with loans.

Classification of loans mean and include only such assets of the balance sheet of a bank

which do not yield interest income and which have remained past due for some quarters.

The enormity of the loan classification status of Bangladesh can be gauged from the

figures of total classified loan in the country. Loans are generally categorized in

Bangladesh as either unclassified or classified. Loans are classified which are judged to

have a reduce chance of repayment. Loans are classified as substandard, doubtful and

bad/loss as per classification guidelines by the Bangladesh Bank. The status of loan

classification in Bangladesh depicts a worsening situation of the Banking sector in

Bangladesh in subsequent years after the implementation of Financial Sector Reform

Program. Loan classification made two pronged attacks on the activities of banks.

Fist, interests applied on loans are not taken into account because such

interests are to be taken into account only on its realization.

Second, banks have to make provisions on classified loans as per guidelines

provided by the Bangladesh Bank from out of the income earned by them

on performing loans.

3.12.2 Objectives of Loan Classification:

Find out net worth / adjusted capital of bank

Help for assessing financial soundness of a bank

Calculate the required provision and the amount of interest suspense

Put the bank on sound footing in order to develop sound banking practice in

Bangladesh.

3.12.3 Importance of Loan Classification

Strengthen credit discipline

Improve loan recovery positions

Make planning for future course of loan

3.12.4 Type of Loans to be Reported in CL:

For application of classification criteria, loans are divided into the following:

SL. Types of

No. LoansDefinition

Reported

to be in

a. Continuous

These are those advances, which do not have any set schedule for drawing or disbursement but usually have a terminal date of full adjustment or repayment. e.g. OD, CC, etc.

CL-2

b. Demand The loans which become payable after serving CL-3

demand notice by the bank concerned are termed as Demand loan. e.g. forced LIM, PAD, FBP, IBBP, etc.

c. TermThese are loans, which have a specific term for repayment as specified in the loan agreements. e.g. project finance, industrial finance, etc.

CL-4

c. TermThese are loans, which have a specific term for repayment as specified in the loan agreements. e.g. project finance, industrial finance, etc.

CL-4

d. Short Term agricultural / Micro

The credits, which are categorized as short term in the Annual Credit Programs issued by the Agricultural Credit Department (ACD) of Bangladesh Bank from time to time, are termed as Short Term Agricultural Credit (STAC). The credits disbursed in agricultural sector having repayment due up to and including 12 months from the date of first disbursement will also be included in this loan category.

Short-term micro-credit means loan up to Tk. 10,000.00 and having repayment due up to and including 12 months. These loans may he termed as non-agricultural credit,weaver’s credit or credit against bank’s own project.

3.12.5 Basis for Loan Classification:

According to BRPD Circular No.16, 1998 all loans and advances and are classified on the

basis of two criteria viz.:

Objective Criteria and

Qualitative Judgment (QJ) Criteria

The above criteria along with definitions are described in the following table:

A. Objective Criteria

SL.

No.

Status Types of

Loans

Definition

1.Unclassified (UC)

AllCurrent loans with required/ adequate eligible securities.

2.Sub-standard (SS)

ContinuousOverdue is more than 3 months but less than 6 months

DemandOverdue is more than 3 moths but less than 6 months from the date of serving notice / creation of forced loans.

Term (Less than 5 years)

If the defaulted amount of installment is equal to installment/installments payable in more than 6 months but less than 12 months.

Term (Less than 5 years)


Term (More than 5 years)


Short Term Agricultural/ Micro

Overdue is more than 12 months but less than 36 months

3. DoubtfulContinuous

Overdue is more than 6 months but less than 12 months.

DemandOverdue is more than 6 months but less than 12 months from the date of serving notice/creation of forced loans.

Term (Up to 5 years)




Short Term Agricultural / Micro

Overdue is more than 36 months but less than 60 months.

4. Bad/Loss

Continuous Overdue is more than 12 months

DemandOverdue is more than 12 months but less than 12 months from the date of serving notice / creation of forced loans.

Term (up to 5 years)

If the defaulted amount of installment is equal to installment/installments payable in more than 18 months.


If the defaulted amount of installment is equal to installment/installments payable in more than 24 months.

Short Term Agricultural/ Micro

Overdue is more than 60 months

B. Qualitative Judgment (QJ) Criteria

SL.

No.

Status Types of

LoansDefinition

Sub-standard

(SS)

All A loan is considered sub-standard when the degree of

risk of non-payable is so high and there is reasonable

prospect that the loans condition can be improved.

Doubtful Chances of recovery is uncertain

Bad/Loss

(BL)

All No security held. Borrower not traceable. Time barred

loan cases. No hope for recovery.

3.12.6 Sources of Data for Preparation of CL:

Loan ledger/ Records

Instruction from Head Office/ Bangladesh Bank

Calculated

Derived

Calculated / Derived

Copies from previous classification forms

Invention/Bin cards

3.12.7 Eligible Securities:

Gold/Gold Ornaments 100%

Govt. securities / FRS Shares / Debentures etc. 100%

Un expired guarantees (Govt./Bangladesh Bank) 100%

Readily salable goods under control of bank 50% and

Market value of mortgaged property 50%

The bank should assess valuation of securities

3.12.8 Calculation of Interest on Classified Advances:

Interest on substandard and doubtful loan accounts should be credited to “Interest

Suspense Account” instead of crediting the same to the interest income account.

Calculation of interest on Bad/Loss loan accounts should be deferred instead of

calculating the same on those accounts.

If there is any recovery on the above accounts that recovery/ portion of recovery will be

treated as interest recovery, not principal recovery. After adjustment of interest due,

principal portion of respective loan account will be adjusted later on.

3.13 Existing Process of Handling Loans

1. Getting Loan Proposal from Party

2. Collection Information

3. Evaluating Project and Proposal

4. Evaluating Collateral

5. Decision

6. Sanctioning and Disbursing Loan

7. Supervision of Loan

8. Recovery of Loan

3.14 Guarantee

The branch offers three types of Guarantee that are as follows-

a) Tender or Bid Bond Guarantee: The tender guarantee assures the tendered that

tenders shall uphold the conditions of his tender during the period of the offer as binding

and that he/she will also sign the contract in the event of the order being granted.

b) Performance Guarantee: A Performance guarantee expires on completion of the

delivery or performance. Beneficiary finds that as a guarantee, the contract will be

fulfilled in every respect and can retain the guarantee as per provision for long time.

Including a clause stating that the supplier can claim under the guarantee, by presenting

an acceptance certificate signed by the buyer, can counteract this.

c) Advanced Payment Guarantee (APG): This type of guarantee is given against work

order. This idea can be made clear with the help of an example. Before the beginning of

Jamuna Bridge construction, the Government collected money from different sources to

pay the contractors in advance. But there was a risk for the Government that the

contractors might not do there construction work even they were paid in advance. So the

Government asked Bank Guarantee from them. Then the contractors submitted Bank

Guarantee to the Government. This type of Guarantee is called Advanced Payment

Guarantee.

3.15 Issuance Procedure of Guarantee

Bank guarantee is a contractual relationship between the account (client) and the

beneficiary. For issuing Bank Guarantee, a customer has to apply to the branch in his or

her own pad. Normally the bank prepares the format of the guarantee. The proposal for

Bank Guarantee contains the following particulars-

Name of the Borrower with address

Nature of Facility

Extent of Facility

Purpose

Security

Margin

Commission

Validity

Beneficiary

Liability position of the Borrower –

a) Nature of Facility

b) Extent of Facility

c) Drawing Power

d) Margin amount (Tk.)

e) Outstanding/Net exposure (Tk.)

f) Validity.

Then Bank issues Bank Guarantee of Judicial Stamp. The conditions for issuing Bank

Guarantee are-

a. The customer must maintain a Current Deposit (CD) account

b. The customer must keep certain percentage of guaranteed money (usually 2%)

as margin. Bank charges 0.50% commission on the guaranteed money per quarter (i.e., 3

months)

After realizing all the above charges, Bank then issues the Guarantee. For this

issuance, Banker’s Liability is created and the following entries are given-

Customer’s Liability --------------Dr.

Banker’s Liability------------------Cr.

When the guarantee is expired, the guarantee is marked as “cancelled” and the following

entries are given-

Banker’s Liability------------------Dr.

Customer’s Liability --------------Cr.

The branch also issues Revolving Guarantee.

A Guarantee issue Register is maintained to record following information about

Guarantee-

Name of the Customer

Account no.

Guarantee no.

Issuing Date

Date of Approval/ Reference no.

Beneficiary of the Guarantee

Amount of Guarantee

Margin (percent and amount)

Commission

Date of Expiry.

3.16 Industrial Sectors Financed by Agrani Bank

Followings are the sectors that are financed by Agrani Bank under its Industrial Credit

Scheme –

Composite Textile

Textile Spinning

Oven Fabrics

Neat Fabrics

Export-oriented Garments

Sweater Factories

Garment Accessories

Printing and Packaging

Paper and Board Mills

Cold Storages

Tannery, Footwear and Rubber Industries

Engineering Industries

Chemical Industries

Glass and Ceramics Industries

Partex Board Industries

Cement Industries

3.17 Classification of Industrial Credit of Agrani Bank

Agrani Bank classifies its overall industrial credit into three (03) broad headings. These

are as follows-

1) Small and Cottage Industries;

2) Medium and Large Industries; and

3) Working Capital.

3.18 Sources of Funds for Industrial Credit

The sources of funds for industrial credit operation in case of Agrani Bank are as follows-

1) Foreign Aid; and

2) Own Funds.

3.19 Consortium for Industrial Credit

Agrani Bank has consortium agreement with the following banks and financial

institutions for industrial credit purpose –

a) Janata Bank

b) Sonali Bank

c) Rupali Bank

d) Bangladesh Development Bank Limited (BDBL)

e) Investment Corporation of Bangladesh (ICB)

f) Eastern Bank Limited

3.20 Application for Industrial Credit

Getting loans or advances is not that easy for an entrepreneur from any commercial bank.

She/he has to follow some prescribed ways to acquire the loans or advance and it

demands some preparation from the part of the borrower because the amounts that will be

sanctioned by the bank are not of its own. The public deposits these amounts. So it is

very risky for a bank to lend to the borrower. If the bank fails to recover that money then

it should be paid from its own fund. As a result, banks fixed a systematic way to

minimize this lending risk and try to use the money properly.

A loan proposal for any kind of industrial credit offered by Agrani Bank generally

requires the followings –

Application for the loan

Required papers for ownership of the industry

Schedule of mortgaged properties and relevant papers

Market reputation of the applicant

Other Banks’ opinions about the previous money lending

Feasibility Study

CRG Report

Financial Spread-sheet Analysis (FSA)

Credit Report

Go-down Inspection Report

Valuation Certificate (to be done by the engineer of the bank)

Trade License and CIB Report

Certificate from approved Advocate in respect of immoveable property

Commercial Invoice

Certificate of Origin

Memorandum of Association and Articles of Association

No Objection Certificate (NOC) form the Local Authority and form the Ministry

of Environment

CS, RS and SA of the land

Mutation Certificate

Affidavit and Personal Guarantee

General irrevocable Power of Attorney

3.21 Project Appraisal

It is the reinvestment analysis done by the banker before a project he approved. Project

appraisal in the banking sector needed for the following reasons:

To justify the soundness of an investment

To endure repayment of bank finance

To achieve organizational goals

To recommend it the project is not designed properly

3.21.1 Techniques of Project Appraisal

An appraisal is a systematic exercise to establish that the proposed project is a viable preposition. The appraising officer checks the various details submitted by the promoter in first information sheet credit application form, feasibility report. Agrani Bank Limited, Bangladesh considers the following aspects in appraising:

Entrepreneur

Viability of the Project

The project should be viable from organizational, technical, commercial, financial and economic points of view.

3.21.2 Head Office Approval

Upon receipt of the credit line proposal from the branch the Head Office again appraises the project. If it seems to be a viable one, the HO sends it to the Head Office Credit Committee (HOCC) for the approval of the loan. The Head Office Credit Committee (HOCC) considers the proposal and takes decision whether to approve the loan or not. If the loan is approved by the HOCC the HO sends the approval to the concerned branch.

3.21.3 Sanction Letter

After getting the approval of the HO the branch issues the sanction letter to the borrower. A sanction letter contains the following particulars amongst other details:

Name of borrower.

Facility allowed.

Propose.

Rate of interest.

Margin

Period of the loan and mode of adjustment.

Security.

3.22 Disbursement Procedures of Industrial Credit

The disbursement procedures of industrial credit done by the Agrani Bank Sonargoan

Road, Branch, Dhaka are showing in the following flow chart:

Source: Industrial Credit Department of Agrani Bank,

Submission of application with relevant papers attached

Project sight inspection by the concerned bank officials, engineers from the Head Office and experts

Applicant’s profile, financial standing, sight inspection report are examined by the officials of the branch

Submission of the branch’s appraisal report to the Industrial Credit Division (ICD), Head Office

If ICD approves the project, then it sends Sanction Letter to the branch mentioning the “Debt Equity Ratio”

Documentation is done and the customer deposits the equity

Project implementation and follow-up by the officials of the branch

3.23 Presentation and Interpretation of Data

Table-3.1: Statement of various Loans and Advances of Agrani Bank, Sonargoan Road

brance, Dhaka as on 30-09-2012.

Serial no Loans and Advances Amount (in TK.)

01 Continuous loan 1543028000

02 Demand loan 1472757000

03 Term loan up to 5 years 1756450000

04 Term loan over 5 years 1334540000

05 Short term Agri. credit & micro credit -

06 Staff loan 130915000

Total 6237690000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.2: Statement of Total Classified Loans and Advances and Recovery of Agrani

Bank, Sonargoan Road Branch, Dhaka.

Year Amount of Classified Loans

and Advances

(in Tk.)

Recovered Amount During the Year (in Tk.)

Outstanding Amount at the end of the Year

(in Tk.)

2008 530000000 100000000 430000000

2009 680000000 130000000 550000000

2010 600000000 110000000 490000000

2011 780000000 170000000 610000000

2012 750000000 225000000 525000000

Source: Agrani Bank Limited Sonargoan Road, Branch, Dhaka (Credit Department)


The Table-3.2 and the Graph show that the amount of Total Classified Loans and

Advances has increased from the year 2008 to 2012. It is a negative symptom for the

branch. But the percentage of recovery is favorable in the year 2012.

Table-3.3: Statement of Total Amount of Continuous Loans and Advances of Agrani

Bank, Sonargoan Road Branch, Dhaka.

Year Amount of Continuous Loans and Advances (in Tk.)

2008 1052000000

2009 1205000000

2010 1185000000

2011 1300000000

2012 1543028000



Table-3.4: Statement of Total Amount of Demand Loans and Advances of Agrani Bank,

Sonargoan Road Branch, Dhaka.

Year Amount of Demand Loans and Advances (in Tk.)

2008 1332200000

2009 1120000000

2010 1251200000

2011 1405500000

2012 1472757000



Table-3.5: Statement of Total Amount of Term Loans and Advances (upto 5year) of

Agrani Bank, Sonargoan Road, Dhaka.

Year Amount of Term Loans and Advances (upto 5year)

(in Tk.)

2008 1051700000

2009 1804200000

2010 1450000000

2011 1505200000

2012 1756450000



Table-3.6: Statement of Total Amount of Term Loans and Advances (over 5 years) of Agrani Bank, Sonargoan Road Branch, Dhaka.

Year Amount of Term Loans and Advances (over 5 years) (in Tk.)

2008 1110000000

2009 1204550000

2010 1280000000

2011 1374000000

2012 1334540000



Table-3.7: Statement of various Interest Rate charged by Sonargoan Road Branch,Dhaka.

Types of Advances Interest Rate

Agriculture 8-10%

Agriculture-based Industry 10-13%

Agri based working capital 14%

SME & Micro credit 10-14%

Large and Medium Term 14%

Working Capital 16%

Export 7%+Service charge 2%.

If expired then 16%

Import 16%

Commercial Lending 16%

Cottage Industry 12-12.5%

House Building 15-16%

Others 10-16%

Source: Central Accounting and Fund Management Department of Agrani Bank.

Chapter-04

RACTICAL Experiences

4.1 Working experience at Agrani Bank Limited

Agrani Bank Limited is a state owned bank of Bangladesh. Being able to work in this

bank I find myself lucky. I worked at the Sonargoan Road Branch of Agrani Bank

Limited. The working environment of Agrani Bank Limited was really nice. I have

collected necessary information from this Branch of Agrani Bank Limited. I worked 2

weeks in General Banking Section, 1 week in Foreign exchange section & 3 weeks days

in Loan & Advances Section. The experience that I collect in six weeks that is very

effective for me.

4.2 Specific Responsibilities

During my internship I worked in different department. That is a great

opportunity for me. At first I was in Dispatch Desk for 2 weeks then General

banking section for 4 weeks and finally in credit section for for weeks. So it was

a great experience for me to work in different departments.

Dispatch desk:

Have marked and sealed, with the date, subject, and the sender's information

Record reference number of each letter

Give requisition for cheque books and account opening form.

Organize the cards and send them to the proper address (via courier)

Provide particular information to the customer.

Remittance:

Help customer to fill up accounting opening form

Provide customer related information.

Store all the form systematically and organized way.

Scan the signatures of the new accountholders along with their pictures.

Fill up Scheduled Bank Statistics (SBS) for each Deposit Pension Scheme, Current

and Savings account, and Fixed Deposit Account

Fill up KYC (Know Your Customer).

Write Pay Order

Prepare FDR and Pay Order block with seal

Account opening:

Fill up current accounts from

Make transaction portfolio

Provide cheque books

Provide internet banking form and help to fill it up

Scan signature card and photograph

Fill up SBS and KYC form for each customer

Clearing department:

Collect clearing cheques (cheques from another branch)

Endorse the cheque and send it for verifying signature

Sealed the received cheques with crossing seal.

If there are any return cheque call customer

Record return cheque in register book

Credit:

Had to rearrange all the customer files

Printing, typing and photocopying documents

Checking and filling up CIB forms

Learning to put different types of seals

prepare the inter-branch memo for pay order

preparing head office forwarding letter

Preparing purchase order for consumer Loan on the basis of client’s quotation.

Fill up all require information of a particular customer.

Calculate processing fee and vat.

4.3 Critical Observation & Recommendation

A good chain of command is always followed

Work load of remittance department is was more than compared to the number of

working employees.

There has not any chance of job rotation.

To motivate employees it is much needed.

To increase the rate of Work they need faster computer with user friendly

operating system.

Chapter-05

Finding and analysis

5.1: Shortcomings of Agrani Bank Limited

Bureaucratic complexity in Management of ABL is very high in relation to general

banking function.

Management of GB practice excess formalities.

In absence is service providing mentality.

Interference of CBA and Officer Somiti in operation of GB

Lobbing from upper level for doing unfair activities,

Lacking of motivation in GB personnel due to irregular promotion.

Absence of using IT application in wide range.

Manual based operations exist at all.

5.2: SWOT Analysis of Agrani Bank Limited

As a financial organization, Agrani Bank Ltd. has some strengths, weakness,

opportunities and threats, to identify the strengths, weakness opportunities and treats a

tool is used by me that is SWOT analysis. Here, S represents to strengths, W refers to

weakness, 0 denotes to opportunities and T indicates to threats.

Strengths

State owned bank

Wide image

Unlimited trustiness about ABL to rural people

High commitments for customers.

Qualified and experiences personnel etc.

Weakness

Absence of service providing mentality

Absence of IT applications.

Somewhat manual based

Lack of motivation of workers.

Depends on Head office.

Opportunities

High demand of credit.

High demand of small enterprise financing.

High demand of remittance facility.

High demand of investment by depositing.

Threats:

Interfere of CBA and Officers’ Somiti

Some commercial and foreign banks.

Some rules and regulations of Bangladesh Bank.

Present of similar types of retail banking product etc.

Chapter-06

Conclusion and recommendation

6.1. Conclusion

Banks are currently undergoing sweeping changes in function and form. Key trends that

reshaping banking today are service proliferation, risking competition, deregulation,

rising funding costs, technological revolution, consolidation and geographic expansion,

globalization of banking and last but not the least increased risk of failure.Traditional

banking may be dying, but if banks are given greater freedom to respond to the public’s

changing demands for new services, they need not pass away. In addition to

intermediation and ancillary services, only banks provide the payment services.

During the six weeks internship program at Agrani Bank, Sonargoan Road,Branch,

Dhaka almost all the desks have been observed more or less. This internship program has

been arranged for gaining knowledge of practical banking and to compare this practical

knowledge with theoretical knowledge. Comparing practical knowledge with theoretical

involves identification of weakness in the branch activities and making recommendations

for solving the weakness identified. Though all departments and sections are covered in

the internship program, it is not possible to go to the depth of each activities of branch

because of time limitation. So, objectives of this internship program have not been

fulfilled with complete satisfaction. However, highest effort has been given to achieve the

objectives of the internship program.

During the internship, it is found that the branch provides all the conventional banking

services as well as some specialized financing activities to the economy. Foreign

exchange department provides all the services related to international and disburse credit

if the proposal is sound. As specialized financing, it provides term finance to medium and

small-scale industries. The branch also provides house-building loan. Thus by providing

this various services, Agrani Bank, Sonargoan Road Branch, Dhaka is playing an

important role in the banking system and in the payment system of Bangladesh.

6.2 Recommendation

There are some recommendations toward concern authority for overcoming the

shortcomings of ABL in below:

1. All banking activities should be performed using IT

2. Bank should neglect the manual based operation

3. All branches should be well decorated

4. Staff and officers should speak polite and low voice

5. Bank should introduce new product

6. Bank should consider experience, written test and viva examination in cases of

promotion

7. Bank should provide appropriate training

8. Bank should take motivational effort

9. To limit interferences of CBA and Officers’ Somiti.

Bibliography:

1. Text book of fundamental course training program for ABL officials

2. Annual report of ABL 2011

3. Handbook- “Banking and Insurance Policy” by Bangladesh Bank

4. http://www.agranibank.org/

5. http://en.wikipedia.org/wiki/Agrani_Bank

6. http://www.facebook.com/pages/Agrani-Bank/103725012999627

7. http://www.banglapedia.org/httpdocs/HT/A_0063.HTM

8. http://en.wikipedia.org/wiki/BusinessWeek