Loans & Advances BASIC Bank Ltd.

The main objective of a business organization is to get more profit. If the business
rotates successfully the profit is gained in a satisfactory mode. As we know very well
that bank is nothing but a financial intermediary and it takes deposit from surplus
economic units and deploy the fund to deficit economic units through credit
deployment, so the more recoverable credit is deployed the more profit is gained. In
fact this credit deployment process is being run under Loans & Advances department.
he Loans & Advances department is very important part of the branch operation that
also provides administrative support for the lending activities of the branch. he Loans
& Advances department provides an effective perfect check and balance on funds lend
to clients and that the transaction is within approved limit for borrower and amount. In
!A"I# !ank Limited, $%&' !ranch, a big amount of loans and advances are
sanctioned every year. (n )ovember *+, ,++* otal Advance provided by $%&'
!ranch was k.-./.,0 Lac.
3.2 Credit Policy of BASIC Bank Limited
he credit policy of any banking institution is a combination of certain accepted time
tested standards, and some other dynamic factors determined by the realities of
varying and changing situations in the market place.
#redit policy lays down the basic principles and broad parameters of the lending
operations. he key is to a sound, healthy and profitable credit operation, however, lies
in the 1uality of judgment and sense of proportion of the officers making lending
decisions, and their knowledge of the borrowers and the market place.
3.3 Basic Principles of Loans and Advances
!asic principles of loans and advances are as follows2
-. Aggregate loans and advances shall not e3ceed ten times the !ank4s net worth
or 567 of customers4 deposits whichever is lower 8e3cluding loans and
advances covered by specific counter2finance arrangements9.
,. :ithin the aggregate limit of loans and advances as mentioned in 8-9 above,
6+7 of lending will be to small industry sector in accordance with prescribed
norms of the ;overnment and the #entral !ank in terms of the !ank4s
objectives with 6+7 to the commercial sector.
*. )o term loans will be approved for the commercial sector. %3ceptions will be
rare and will re1uire approval of the %3ecutive #ommittee.
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Loans & Advances BASIC Bank Ltd.
/. All lending will be ade1uately secured with acceptable security and margin
re1uirements as laid down by the <ead (ffice #redit #ommittee.
6. he !ank shall not incur any uncovered foreign e3change risk 8currency
e3posure9 in the lending of funds.
5. he !ank shall not incur any risk of e3posure in respect of unmatched rates of
interest on funding of loans and advances beyond -67 of outstanding loans
and advances.
=. %nd2use of working capital facilities will be closely monitored to ensure lending
user for the purpose for which they were advanced.
0. #ountry risk in loans and advances will be accurately identified and shall be
within the country limits if any approved for the !ank. he same treatment will
be given to country risk arising out of contingent liabilities relating to Letters of
#redit and Letters of ;uarantee.
.. Loans and advances shall be normally funded from customers4 deposits of a
permanent nature, and not out of short term temporary funds or borrowings
from other banks or through short term money market operations.
-+. he aggregate outstanding loans and advances 8e3cluding loans and advances
covered by specific counter2finance arrangements9 shall be dispersed
according to the following guidelines 8subject to item , above whereby 6+7 of
lending being to small industry section9>
8a9 "hort term commercial lending 8to include self li1uidating and other short term
finance to retail and wholesale business clients to finance their usual domestic
and international trade?shipping of goods9. his category to include working
capital to hotel and tourism.
8b9 @acilities to "hipping and ransport 8facilities for the purchase and
construction of ships?vessels and other modes of transport both by land and
air9.
--. "preads over cost of funds on loans and advances and commissions and fees on
other transactions should be commensurate with the rating of the borrower, 1uality
of risk and the prevailing market conditions.
-,. #redit evaluation will include>
a9 &revalent credit practices in the market place.
b9 #redit worthiness, background and track record of the borrower.
c9 @inancial standing of the borrower supported by financial statements
and other documented evidence.
d9 Legal jurisdiction and implications of applicable laws.
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Loans & Advances BASIC Bank Ltd.
e9 %ffect of any applicable regulations and laws.
f9 &urpose of the loan?facility.
g9 enure of the loan?facility.
h9 Aiability of the business proposition.
i9 #ash flow projections.
j9 Buality and ade1uacy of security, if available.
k9 Cisk taking capacity of the borrower.
l9 %ntrepreneurship and managerial capabilities of the borrower.
m9 Celiability of the sources of repayment.
n9 Aolume of risk in relation to the risk taking capacity of the !ank or
company concerned.
o9 &rofitability of the proposal to the !ank or company concerned.
-*. )o credit shall be e3tended to a #ustomer %ntity that e3ceeds in total commitment
more than -+7 of the !ank4s capital and free reserves.
-/. %3ception will re1uire approval of the !oard of $irectors.
3.4 Loans and Advances offered by BASIC Bank it! Little "laboration#
A. $verdraft %$&'# It is a continuous advance facility. !y this agreement, the banker
allows his customer to overdraft his current account up to his credit limits sanctioned
by the bank. he interest is charged on the amount, which he withdraws, not on the
sanctioned amount. ($ is of two types practiced in !A"I# !ank Dirpur branch. hese
are as follows2
(. Sec)red $verdraft %S$&'# !ranch sanctions "($ against different
securities like @$C, "anchaypatras and :ork (rders.
2. Temporary $verdraft %T$&'# It is given to the valued customers only. It
is not that much secured. Esually it forwards without any security or sometimes
e3ercise lien against the instrument, deposited in the bank. It is given by the
branch manager discretionary power. hough it is given, but it never desirable.
T!e processes of e*tendin+ S$& are as follos ,
i9 he party must have a current A?# with the branch
ii9 If the ownership of the firm is proprietorship, then a trade license must be
submitted and in case of a limited company, all the documents re1uired to
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Loans & Advances BASIC Bank Ltd.
open a current A?#, should be submitted. he financial statements of the
concerned firm should also be submitted.
iii9 he party must maintain a good transaction with the branch and have a
good turnover rate.
iv9 he party will apply to the officer in charge of credit department of the
branch for "($ arrangement
v9 he concerned officer of the branch will give him a #redit Application @orm
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.
vi9 he concerned officer will prepare a F#redit Line &roposal4, where he
writes about the business concern, details of proprietors?directors of the
concern, management structure, the e3isting credit facilities, the
particulars about the facilities that asked for G such as margin limit, date of
e3piry, details of security, and any other relevant information. hen the
proposal is sent to the <ead (ffice, ;eneral Advances $ivision for
approval.
vii9 he responsible $epartment of the ;eneral Advances $ivision will
appraise the proposal and if it seems to a viable then the loan will be
sanctioned.
viii9 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.
he borrower is advised to write, HacceptedI on the original copy if he is
satisfied with the terms and conditions of the bank and retain the duplicate
one as record.
able2*.-> "howing loans and advances offered by !A"I# as on )ovember *+, ,++,
76
Loans & Advances BASIC Bank Ltd.
Credit -acilities $ffered By. $)tstandin+ Amo)nt
in Lac. Tk. %&"P/ Br.'
BASIC Bank Ltd. BASIC &"P/ Branc!
A. Commercial 0 1orkin+ Capital Loan
-. (ver $raft
($
"($
-. (ver $raft
($
"($
+.++
-+*.+=
,. #ash #redit
## 8<ypo9
## 8&ledge9
## 8%3port9
,. #ash #redit
## 8<ypo9

..==
*. !ills &ortfolio
@$!& 8$oc9
@$!& 8#lean9
L!& 8#lean9
L!& 8$oc9
/. !ills &ortfolio



L!& 8$oc9 *.,=
6. Import Loan
&A$
LC
LID
5. Import Loan
&A$
LC

0.-,
=. (ther Loans
Loan ;eneral
"taff Loan
"pl. &rogram
8Dicro #redit9
0. (ther Loans
Loan ;eneral
"taff Loan


-+.=+
-+.=5
"ub2total (42.34
B. Ind)strial Loan
+-. erm Loan
"mall2scale
Industries 8""I9
Dedium2scale
Industries 8D"I9
+-. erm Loan
D"I

,-.-+
+,. :orking #apital
""I
D"I
+,. :orking #apital
""I

,=./.
"ub2total 45.24
6rand Total (44.25
Source: DEPZ Branch, BASIC Bank Ltd.
B. Cas! Credit %CC'# !y this arrangement, a banker allows his customer to borrow
money up to a certain limit. ## is a favorite mode of borrowing by traders,
industrialists, etc. for meeting their working capital re1uirements. It is operated like
overdraft account. $epending 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. !A"I# !ank charges interest on the daily balance of the account. !ased on
charging securities, there are two forms of cash credit G
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Loans & Advances BASIC Bank Ltd.
(. Cas! Credit %7ypot!ecation'# <ypothecation 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 possession. he banker has
only e1uitable charge on stocks, which practically means nothing. It is given
against registered mortgage of land and building, hypothecation of goods and
personal guarantee of $irectors.
2. Cas! Credit %Pled+e'# &ledge is the bailment of goods as security for
payment of a debt or performance of a promise. ransfer of possession is the
judicial sense. In case of pledge goods the bank ac1uire 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 non2repayment. It is not
applicable in $haka %&' branch.
T!e processes of openin+ a CC a8c are as follos,
1. he interested party must have a current A?# and good transaction with the
branchJ
2. Applies for ## pledge or hypothecation arrangementJ
3. @ills up the F#redit Application @orm4 as provided by the respective officerJ
4. he concerned officer prepares a F#redit Line &roposal4 8#L&9 detailing all
relevant informationJ
5. "ends the #L& to the <ead (ffice, ;eneral Advances $ivision for necessary
actionJ
6. <ead (ffice, ;eneral Advances $ivision e3amines the proposal and if finds it
viable then sanctions it and sends it to the branchJ
7. he branch issues tow copies of F"anction Advice4, one for its own record and
the other for the party to keep.
After getting the cash credit arrangement, the banker will issue a che1ue book for
withdrawing cash from the account. :henever the ## account holder wants to
withdraw cash from the account, the cash officer will scrutinize the amount of che1ue
in order to make sure that the total drawing does not e3ceed the sanctioned limit.
C. Loan %6eneral'9 It is given against &ersonal guarantee, hypothecation of goods
and land & building.
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Loans & Advances BASIC Bank Ltd.
&. Staff Loan# $haka %&' branch provides advances to the staff for purchasing
house building, "anchaypatras, and meeting up certain re1uirements like family
medical, personal medical, wedding purposes. !ank provides this facility under
installments. Loanble amount varies on the basis of purpose.
". Bills Portfolio# $haka %&' branch purchases demand bills of e3change that
are called F$raft4 accompanied by documents of title to goods such as bill of lading,
railway receipt and truck receipt. he purchase of bill of e3change drawn at an
issuance, i.e. for a certain period maturing on a future date and not payable on
demand or sight.
-. Term Loan# !A"I# bank is advancing both short and medium term credit to the
commercial sector on the basis of their capital structure, constitution and li1uidity
consideration. Interest rate is -,7 for ""I and -*7 for D"I. It is given against land
and building along with machinery, personal guarantee of $irectors and hypothecation
of raw materials.
3.2 6eneral proced)re for Loans and Advances
he following procedure is applicable for giving loans to the customer. hese are2
- > $uly fill2up @irst Information "heet 8@I"9
, > Application for #redit Line
* > #ollecting #I! report from !angladesh !ank
/ > Daking credit line proposal
6 > &roject appraisal
5 > <ead office approval
= > "anction letter
0 > $ocumentation
. > $isbursement
-+ > Donitoring
-- > Cecovery
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Loans & Advances BASIC Bank Ltd.
3.2 -irst Information S!eet %-IS'#
@irst Information "heet 8@I"9 is the prescribed form provided by the respective branch
that contains basic information of the borrower. It contains following particulars
i. )ame of the concern with its factory location, (ffice address and el )o.
ii. )ame of the main sponsors with their educational 1ualification.
iii. !usiness e3perience of the sponsors, details of past and present business,
its achievement and failures, name of all the concerns wherein the sponsors
have involvement.
iv. Income ta3 registration no. with the amount of ta3 paid for the last three
years.
v. $etails of unencumbered assets 8movable & immovable9 personally owned
by the sponsors.
vi. $etails of liabilities with other banks and financial institutions including
securities held there against.
vii. &urpose of loan sought from !A"I# !ank
viii. %stimated cost of the project & means of finance.
3.: Application for Credit Line#
After receiving the first information sheet from the borrower !ank official verifies all the
information carefully. <e also checks the account maintains by the borrower with the
!ank. If the official become satisfied then he gives application for credit line form to the
prospective borrower. he Application for #redit Lines #ontain the following
particulars>
i. )ame, address, telephone, tele3 no. & cable address.
ii. $ate & place established? incorporated, status? constitution.
iii. )ames of major shareholders 8in e3cess of 679. "tate relationship between
shareholders.
iv. )ames and net worth of directors?partners?owners with background &
relationship with each other 8)et worth statement of each person to be
attached as per format9.
v. #apital structure & how the capital is deployed in business.
vi. $etails of properties?assets of the applicant, with valuation against each type
of property?assets and details of charges against them.
vii. )ames and addresses of subsidiaries?affiliates?allied concerns, stating
relationship with applicant, nature of business and borrowings from banks
against each 8including !##I9
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Loans & Advances BASIC Bank Ltd.
viii. )ature & details of business.
i3. Latest audited? un2audited balance sheet and profit & loss statement
attached will be submitted by>
3. Danagement structure 8Including their e3perience and 1ualification9.
3i. )ames & address of other bankers, sanctioned facilities & liabilities
outstanding with details of securities there2against.
3ii. ype, e3tent and period of credit facilities re1uired.
3iii. &urpose of facility, repayment arrangement 8with dates and amount9, sources
of repaymentJ
3iv. $etails of securities offered & any other relevant information.
3.5 Collectin+ CIB ;eport from Ban+lades! Bank#
After receiving the application for credit line< !A"I# !ank sends a letter to !angladesh
!ank for obtaining a report from there. his report is called #I! 8#redit Information
!ureau9 report. !asically branch seeks this report from the head office for all kinds of
loans. he purpose of this report is to being informed that whether the borrower has
taken loan from any other bankJ if KyesK< then whether the party has any overdue
amount or not.
3.4 =akin+ Credit Line Proposal %CLP'#
If the officer thinks that the project is feasible then he will prepare a &roposal . !A"I#
!ank prepares the proposal in a specific from called credit line proposal. It contains
following relevant information>
i. !orrowerJ
ii. $ate established, constitutionJ
iii. Dain sponsor? director with backgroundJ
iv. #apital structure, addressJ
v. Account opening date, introduced by, type of business, particulars of
previous sanctionsJ
vi. %3isting vis2L2vis proposed credit limitsJ
vii. &articulars of proposed?additional facilitiesJ
viii. "ecurity 8%3isting & &roposed? Additional9J
i3. Dovement of accountsJ
3. #omponents on the conduct of the accountJ
3i. $etails of deposit, liabilities of allied concerns, liabilities with other banksJ
3ii. #I! reportJ
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Loans & Advances BASIC Bank Ltd.
3iii. "tock position 8&ls. &rovide "t. report9J
3iv. Cated capacity of the project8Item wise9J
3v. &roduction?purchase during the periodJ
3vi. "ales during the periodJ
3vii. !usiness received for the period 8Last three years9J
3viii. %arning received for the periodJ
3i3. Associated lending?business risk 8s9J
After fulfilling the previous particulars, the officer places the #L& to the !## 8!ranch
#redit #ommittee9. !## is then find out the right borrower by considering the following
6 #4s. hese are character, capital, capacity, collateral, condition 8Meconomic9.
Selection of ri+!t borroer# he borrower has to be creditworthy and competent
enough to run the proposed industry. @ollowing are the considerations2
&reference given for educated ? knowledgeable sponsors, who know about
their business concern, have technically know2how and e3pertise in the field
of proposed industryJ
:ho have own land and building for running the projectJ
#lient with innovative ideasJ
#lient must have net worth more than ,.6 times of the e1uity re1uired for
investment in the projectJ
:ho have good dealings with the bankers ?outside parties and has social
contacts and standingsJ
<ave an a?c with !A"I# !ank $haka %&' !ranchJ
After approving the proposal by !##, branch then sends the #L& to the respective
division in <ead (ffice. In <ead (ffice there are two divisions of credit department.
(ne is Ind)strial Credit &ivision 8I#$9 and another is Commercial Credit &ivision.
After receiving the #L& with application for credit line, resolution copy made in the
special meeting of the !##, branch investigation report on borrowers real estate,
statement of stock and bank statement 8statement of account9, the respective divisions
then divide the loan proposals into ""I 8"mall2scale industries9 and D"I 8Dedium
scale industries9 according to the limit. @or ""I the limit is up to -+ crore and for D"I it
is -+ crore and above. hen the respective officer goes for project appraisal.

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Loans & Advances BASIC Bank Ltd.
3.(> Pro?ect Appraisal
It is the pre2investment analysis done by the officer before approval of the project.
&roject appraisal in the banking sector is needed for the following reasons>
i9 o justify the soundness of an investment
ii9 o ensure repayment of bank finance
iii9 o achieve organizational goals
iv9 o recommend if the project is not designed properly
Basically 7ead $ffice is en+a+ed in appraisin+ t!e folloin+ pro?ects#
a9 &roposal for sanctioning a term loan.
b9 &roposal for sanctioning a working capital.
c9 &roposal for sanctioning a term loan and working capital.
d9 &roposal for renewal of advance limit.
e9 &roposal for enhancement of advanced limit.
f9 &roposal for enhanced renewal of advanced limit.
g9 &roposal for e3tension of repayment period.
Tec!ni@)es of Pro?ect Appraisal In IC&
An appraisal is a systematic e3ercise to establish that the proposed project is a viable
preposition. he appraising officer checks the various details submitted by the
promoter in first information sheet, application for credit line and #L&. !A"I# !ank
considers the following aspects in appraising a proposal>
-. echnical viability
,. #ommercial viability
*. @inancial viability
/. %conomic viability
he <ead (ffice 8<(9 mainly checks the technical, commercial and financial viability of
the project. @or others <( is dependent on branch4s information. !ut when the loan
size is big, then the <( verifies the authenticity of information physically.
3.(( 7ead $ffice Approval#
he respective officer of <ead (ffice appraises the project by preparing a summary
named Hop "heetI or H%3ecutive "ummaryI. hen he sends it to the <ead (ffice
#redit #ommittee 8<(##9 for the approval of the loan. he <ead (ffice #redit
#ommittee 8<(##9 considers the proposal and takes decision whether to approve the
83
Loans & Advances BASIC Bank Ltd.
loan or not. If the loan is approved by the <(##, the <( sends the approval to the
concerned branch with some conditions. hese are like>
$rawing will not e3ceed the amount of bill receivables.
he tern over in the account during the tenure of the limit should not be
less than four times of the credit limit.
All other terms and conditions, as per policy and practice of the bank for
such advance to safeguard the banker4s interest shall also be applicable
for this sanction also.
!ank may charge? alter? cancel any clause 8s9 of the sanction without
assigning any reason whatsoever and that shall be binding upon the client
unconditionally.
!ranch shall not e3ceed the sanctioned limit.
Ce1uired charge documents with duly stamped should be obtained.
$rawing shall be allowed only after completion of mortgage formalities
and other security arrangement.
3.(2 Sanction Letter#
After getting the approval from the <(, the branch issues the sanction letter to the
borrower. A sanction letter contains the following particulars amongst other details>
a9 )ame of borrower.
b9 Danaging partner
c9 )ature of @acility
d9 Amount
e9 %3piry
f9 Cate of interest
g9 &urpose
h9 "ecurity
i9 (ther terms and conditions> (ther terms and conditions are like2
i9 !efore availing the loan all documentation formalities must be completed.
ii9 Cegistered power of attorney in favor of !A"I# bank to sell the
mortgaged property without the consent of the court or owner of the
lender.
iii9 $& note and other usual charge documents? undertakings etc. duly
stamped must be signed and submitted to the authority before the
disbursement of loan.
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Loans & Advances BASIC Bank Ltd.
iv9 he loan shall be governed by all other terms and conditions as per policy
and practices of the bank which will be applicable for the sanction to safe
guard interest of the bank.
v9 he bank reserves the right to amend, modify or withdraw any or all the
terms of the loan at any time without assigning any reason whatsoever or
to terminate? call back the loan facility at any time for which bank or its
official cannot be held responsible for any loss 8s9 for such cancellation of
the loan.
he borrower receives the letter and returns a copy of this letter duly signed by him as
a token of having understood and acceptance of the terms and conditions above.
3.(3 &oc)mentation of loans and advances#
In spite of the fact that banker lends credit to a borrower after in1uiring about the
character, capacity and capital of the borrower, he must obtain proper documents
e3ecuted from the borrower to protect him against willful defaults. Doreover, when
money is lent against some security of some assets, the document must be e3ecuted
in order to give the banker a legal and binding charge against those assets.
$ocuments contain the precise terms of granting loans and they serve as important
evidence in the law courts if the circumstances so desire. hat is why all approval
procedure and proper documentation shall be completed before the disbursement of
the facilities. he documents for loans and advances can be classified into two
categories, namely C!ar+e doc)ments 0 Sec)rity doc)ments.
=ode of C!ar+in+ Sec)rities
!A"I# !ank $haka %&' branch practices these two types of securities.
(. Primary sec)rities# G #ash or cash e1uivalent that is easily li1uidated or
convertible into cash. %3ampleG@$C, "anchaypatra, $& )otes, etc.
2. Secondary sec)rities# G hese securities are tangible securities which can
be realized from sale proceeds or transfer of property. %3ampleG immovable
properties like land, buildings, etc.
he modes of charging securities are as follows2
a9 &ledge
b9 <ypothecation
c9 Lien
d9 Dortgage
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Loans & Advances BASIC Bank Ltd.
Lien# Lien is the right to retain possession and not right of ownership. !ank4s lien is
general lien over its own financial obligation to clients. &roperty under lien cannot be
realized?sold and proceeds thereof cannot be appropriated without notice to the owner
and sometimes without court4s order.
7ypot!ecation# his is mortgage of movables by an agreement and here neither
possession nor ownership is transferred. <ypothecated goods cannot be sold
out?disposed off without notice and court4s order. <owever, if a special power of
attorney is taken in that case can be disposed off without going to the court.
Pled+e# &ledge is the bailment of goods as security for payment of a debt or
performance or promise. <ere, title and ownership are not transferred. &ledge 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.
=ort+a+e# Dortgage is the transfer of interest in immovable property to secure the
repayment of money advanced. (wnership remains with the mortgagor. In case of
e1uitable mortgage, #ourt (rder is necessary and in case of registered mortgage
court4s order is not necessary for sale?disposal of the mortgaged property for
adjustment of advance.
Cate+ory 1ise &oc)ments
All securities are not suitable for all types of advances. here is common type of
charge documents for all types of advances. hese are as follows>
$emand promissory note
Letter of arrangement
Letter of disbursement
Letter of continuity
Letter of revival 8@orm2-&,9.
(ther documents are re1uired for following types of advances
$verdraft8 Loan %6eneral'
Letter of partnership in case of partnership firm or !oard resolution in case
of limited companies.
Letter of pledge? Letter of hypothecation.
Letter of lien for ownership transfer of shares.
Letter of lien for packing credit.
Letter of lien in case of advance against @ $ C
#opy of sanction letter mentioning details of terms and condition duly
acknowledge by the borrower
86
Loans & Advances BASIC Bank Ltd.
Cas! credit %7ypot!ecation'
Letter of hypothecation
Letter of authority empowering the bank to inspect the goods and take
possession of the goods in case of duly drafted by the lawyer of the bank.
"tock report duly signed by the borrower on fortnightly basis or after every
deposit in the loan account or before realizing fund against limit.
Letter of declaration duly signed by the party clearly stating that the goods
hypothecated are not in any case encumbered elsewhere.
"ufficient insurance cover inserting the name of the !ank as mortgage with
bank mortgage clause.
Letter of $isclaimer signed by owner of the godown in case of *
rd
party
godown. hird party ;uarantee if re1uired as per sanction advice.
"tatements of other immovable property of the borrower stating those are
not encumbered.
=ort+a+e# Le+al
#ertificate from pourasava authority that the concerned property is situated
within pourasava area.
(riginal title deed of property.
Latest #", C" parcha along with latest rent receipt of land, ta3, wasa, gas,
electric bills, etc.
!ia2deeds? parcha showing chain of transfer of title.
Letter of guaranty in case of *
rd
party Fs property
)on2encumbrance certificate by engineer and branch manager.
Lawyer4s certificate regarding genuineness of title on the property of the
mortgage and stating in clear term weather the property can be accepted as
security against advances to be allowed.
Letter of guarantee of the owner of the property in case of third party
property.
Demorandum of title deed of property.
Cegistered irrevocable power of attorney duly drafted by bank4s lawyer and
e3ecuted by the owner of the property.
Cegistration certificate is re1uiredJ
Aaluation certificate 8by engineer and branch manager forced sale value to
be considered.
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Loans & Advances BASIC Bank Ltd.
Branc! s!all take note of t!e folloin+ points !ile acceptin+ a property as a sec)rity
-. Land should be situated within municipality area, sub2urban area of city and
industrial or commercial important areas.
,. Cural property, pond and low lying area shall not be taken.
*. Aacant land shall not be taken. It the land is protected by the boundary wall
and the ownership is clearly identified, the same may however be accepted.
/. Land must be owned by the borrower?owner of the project?firm?company
and?or member8s9 of the land shall be obtained duly attested.
6. &roperty owned jointly 8F%jmali4 property9 shall not be accepted.
5. (riginal title deed and bia2deed, Nhatian, &archa, Dutation, certificate, non2
encumbrance certificate, upto date rent receipt shall be obtained and duly
checked by the credit officer, branch manager and the lawyer.
=. he value of the property shall be at least twice the amount of loan.
!ranch2in2charge shall personally ensure properly mortgaged of property and retain
the documents in safe custody. (riginal mortgage deed should be obtained from the
registration office in time.
Transport Loan#
<ire2purchase agreement for hypothecation of the vehicle 8"AD&%$ and
duly )(ACI"%$9
&urchased documents.
Cegistration of the vehicle in the joint name of bank and borrower 8copy of
the blue book to be retained in the branch9
Coad permits jointly in the name of bank and borrower.
Insurance cover against all possible perils inserting name of bank as
Dortgage with bank mortgage clause.
#ertificate signed by the borrower that he has received the vehicle in good
condition and that he will e3ercise due care for maintenance of the vehicle.
Letter of installment.
Endertaking by the party that he will keep the vehicle always ready for
inspection by bank officials.
!ank4s name must be written in the body of the vehicle in !(L$ L%%C".
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Loans & Advances BASIC Bank Ltd.
Sanc!aya Patraya#
!alance #onformation "lip
Letter of $isbursement
!angladesh "anchay&atra? &ratirakhaya "anchaya &atra duly discharged
Identity "lip.
Letter of encashment.
Letter of lien 8first party or third party, as the case may be9.
Cegistered partnership deed.
Cesolution along with Demorandum & Article of Association in case of
limited company & in case of #orporations, resolution of the !oard along
with charter.
Letter of Authority for encashment of #ertificates on prescribed form.
A conformation regarding marking of lien for issuing authority.
&ersonal ;uarantee of $irectors 8e3pecting nominated directors by
;ovt.?#onformations9
3.(4 &isb)rsement
After verifying all the documents the branch disburses the loan to the borrower. A loan
repayment schedule also prepared by the bank and given to the borrower.
3.(2 -ollo.)p
After the disbursement of the loan bank officialsK time to time monitor the loan by
physical observation of the activities of the party. It is done in the following manner>
#onstant supervision
:orking #apital Assessment.
"tock Ceport analysis.
Loan Classification #
Classification Scale #
I. unclassified > Cepayment is regular
II. "ubstandard > Cepayment is irregular or stopped but has
reasonable prospect of improvement.
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Loans & Advances BASIC Bank Ltd.
III. $oubtful debt > Enlikely to be repaid but special collection efforts may result in
partial recovery.
IA. !ad? Loss >Aery little chance of recovery.
Classification Proced)re#
#lassification procedure for all types of bank loans including industrial loans is
governed by the guidelines contained in !C&$ #ircular )o. -5 issued by !angladesh
!ank in 5
th
$ecember -..0 and subse1uently revised partially through !C&$ #ircular
)o. . issued in -/
th
Day ,++-. According to the revised guidelines the principal of
credit classification and provisioning are defined as under>
:ith a view to classifying, loans & advances will be categorized into four different
categories. "uch as>
#ontinuous Loan
$emand Loan
@i3ed erm Loan
"hort erm Agricultural and Dicro2#redit
3.(3 ;ecovery
he loan classification procedure for all types of loan is governed by the guidelines
contained in !C&$ #ircular no -5 dated +5.-,..0 issued by !angladesh !ank and
subse1uently revised partially through !C&$ #ircular no . and -+ dated -/.+6.,++-,
According to this circular If any borrower fails to repay his amount or installment within
the following time period then it will fall under the following classification status.
Le+al -rameork -or Loan ;ecovery
After being classified, bank goes for loan recovery by legal action. <ead office
appoints legal advisers and advises to the branch to file a suit against the defaulted
loanee. !A"I# !ank generally suits files under the Artha Cin Adalat -..+. !esides,
other loan recovery acts are as follows though these are not applicable in !A"I#
!ank.
-. &ublic $emand Cecovery Act2-.-*.
,. !ankruptcy Act2-..=.
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Loans & Advances BASIC Bank Ltd.
*. )egotiable Instrument Act2-00- section -*0 for insufficient fund 8In case
of term loan9.
3.(: BAAB 6CA;AAT""
!A"I# bank offers three types of ;uarantee which are as follows>
Tender or Bid Bond 6)arantee# he 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.
Performance 6)arantee# A &erformance guarantee e3pires on completion of
the delivery or performance. !eneficiary 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.
Advanced Payment 6)arantee %AP6'# his type of guarantee is given
against work order. @or e3ample< before the beginning of Oamuna !ridge
construction< the ;overnment collected money from different sources to pay
the contractors in advance. !ut there was a risk for the ;overnment that the
contractors might not do there construction work even they were paid in
advance. "o the ;overnment asked !ank ;uarantee from them. hen they
contractors submitted !ank ;uarantee to the ;overnment. his type of
;uarantee is called Advanced &ayment ;uarantee.
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