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Introduction
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1.1 Introduction:
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central banks,
4nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic private
banks, 10 foreign banks and 28 non-bank financial institutions. The Financial system also embraces
insurance companies, stock exchanges and co-operative banks. In our country Bangladesh Bank
(BB), as the central bank, has legal authority to supervise and regulate all the banks. It performs the
traditional central banking roles of note issuance and of being banker to the government and banks.
Commercial banks and domestic private banks are the profit-making institution that holds the
deposits of individuals & business in checking & savings accounts and then uses these funds to make
loans. Both general public and the government are dependent on the services of banks as the
financial intermediary. We have chosen IFIC Bank Limited as a representative of other private banks.
We have learned so many things in our course and here we tried to relate the theories with real life
situation and also find out the similarities.
1.
2.
3.
4.
5.
6.
1.3 Methodology:
For the implementation of the study I have worked on IFIC Bank Limited (IFICBL).
In order to make the Report more meaningful and presentable, two sources of data and
information have been used widely.
Face-to-face conversation with the respective executives & officers of the Bank.
Informal conversation with the clients.
Practical work exposures form the different desks of the various departments of the Branch
covered
Relevant file study as provided by the officers concerned.
The Secondary Sources of data and information are Annual Reports of Standard Bank Limited.
Periodicals published by Bangladesh Bank.
Various books, articles, compilations etc. Regarding general banking functions, foreign
Exchange operations and credit policies.
After collection of data, a list of table was prepared on the basis of aims and objectives of the
study and processing, editing and coding of the data were done simultaneously. The tabulated
Data were then analyzed and condensed to obtain the result / objective.
1.4 Limitations:
There are some limitations in the study. I have been faced some problems during the study which
I am mentioning them. The time period of the study is very short. I had only 3 (three) months in
My hand to complete this report, which was not enough. So I could not go in depth of the
study. To prepare this report I have faced the following limitations:
The study was conducted only on the Branch level. Overall banking performance could not
be evaluated for time constraints.
Respondent havent agree withal the service related issues and some answer were indistinct.
Also some secrecy was maintained in the bank and I was not exposed to activities.
Finally, the lack of the depth of my knowledge and the analytical capacity for writing such
report is also a shortcoming of this study.
3 | Page
Chapter 2
CompanyBackground
4 | Page
5 | Page
2014
Long Term: AA2
Definition of Rating
Have very strong capacity to meet,
Their financial Commitment
.They differs from their high rate
commercial banks only to a small
Degree. AA2 is judged to be of
very high quality and is subject to
very low Credit risk
6 | Page
Project Loan
Trade Finance
Muldhan
Women Entrepreneur's
Loan :
Treasury and Capital Market
Money Market
Forex Market
Brokerage House
Agriculture Credit
Krishisharonjamrin
Shechsoronjamrin
Phasalirin
: A Category
(6) Objectives
(8) Control
(9) Board of directors
: Board of directors.
: 14 executing members including chairman & managing director.
: 2193.
: 200,000
: Authorized capital Tk. 5350 million, paid up capital Tk. 1744 million.
(14) Share
: Ownership of the Bank held by the sponsors in the private sector and
Government of the Peoples Republic of Bangladesh. Sponsors and individuals now some 65 percent of the share
capital and the Government own a little more than 35 percent of the shares
(15) Auditing System
9 | Page
Chapter 3
Loan and advance Activities of IFIC
Banklimited
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ADVANCE
Continuous
Consumer
Term Loan Small EnterpriseFinancing.
Financing
Financing.
Figure: types of loan and advances
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and 2014
102,282
advance
2013
2012
2011
2010
84,110
77,160
64,641
47,563
120000
102282
100000
84110
80000
77160
64641
60000
47563
40000
20000
0
1
2014
2013
2012
2011
2010
Figure: Last five years loan and advance of IFIC bank Limited
Interpretation: From the above graph and table we can say that 4he amount of loan and advance of
IFIC bank is increasing day by day. And the highest amount has given in the year 2014 and amount is
102282 million taka.
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ii.
iii.
i.
Cash credit is given through the cash credit account. Cash credit is an active and running
account where deposits and withdrawals may be made frequently. The debit balance of the
account on any day cannot exceed the agreed limit.
Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet
working capital needs of traders, farmers, and industrialist.
It is charged against a property where neither the ownership nor the possession is passed to
the bank.
ii.
The nature, operational work, and characteristics of CC- PLEDGE in as same as CC HYPO.
CC.PLEDGE in different from CC-HYPO only from the securities or business goods
against the loan amount.
It is charged against properties where the ownership may remain to the borrower but the
possession is passed to the bank.
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iii.
Overdrafts are those drawings, which are allowed by the banks in excess of the balance in
the current account up to a specified amount for definite period as arranged for.
Usually provide against FDR, PSS, i.e. financial obligation or any primary securities. The
interest charges from the date of first withdraw.
Interest is calculated and charged only on the actual debit balance on daily product basis.
The interest rate of SOD is 3% above of FDR interest rate, if the FDR is in IFIC Bank. If
the FDR is in other bank then the interest r1te is 14.50%.
Cash Credit
Overdraft
2014
25,443,140,268
23,549,902,570
2013
22,525,977,977
21,179,910,669
2012
2011
2010
18,836,285,222
18,023,424,213
14,598,455,670
12,780,790,671
10,228,475,372
7,129,391,285
b. Term Loan
IFIC Bank gives in the following Term Loan:
i.
Industries Loan
ii.
Others loan
iii.
iv.
v.
vi.
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vii.
I. Industries Loan:
It is a term loan.
It is given for three (3) years at equal installment.
Gross period is allowed of these types of loan.
Gross period is the period that requires earning visible returns
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2 Retailers loan:
Individual/ Proprietorship firm engaged in retail business. They need this type of loan to meet
working capital/ capital finance requirement. Any Bangladeshi individual or small and retail business
house having valid trade license and must have an account with IFIC Bank Ltd can apply for this
loan. The tenor for the loan is maximum 24(twenty four) months.2% is to be charged as a penal
interest on overdue amount (if any). 1% on the loan amount to be realized before disbursement as its
service charge and Taka. 500/- to be realized before disbursement as processing fee.
3.Transport Loan:
Individual, business Enterprises (Other than Public Limited Company) engaged in transport business.
They need fund to Purchase of Road/ Water Transport for commercial use. Any Bangladeshi
Customer of the respective branch having business house/ office in the command area with at least
2(two) years experience in their line of business. Additional 2% charged on the overdue amount as
its penal interest. The tenor for the loan maximum 48(forty eight) months.0.50% is charged as
service charge on loan amount to be realized at the time of disbursement of loan. 1 % on loan amount
(Maximum Tk. 10,000/-) to be realized at the time of disbursement of loan for process the loan.
4. Commercial house building loan:
Individual, business Enterprises (Other than Public Limited Company) having commercial plot can
apply for this loan to construct of commercial building. Any individual or business house in the
command area having account with the branch have the eligibility to apply for this loan. Additional
2% on the overdue amount charged as penal interest, if any. The maximum term of loan is maximum
5(five) years including grace period.0.25% is treated as service charge on loan amount to be realized
at the time of disbursement of loan. Loan processing fee is 1% on loan amount (Maximum Tk.
10,000/-) to be realized at the disbursement of loan.
5. Possession right loan:
Proprietorship concern having no collateral security to offer other than possession right of shop can
apply for this loan to meet up the need of Fixed Working capital Customer of the respective branch
having shop/ business place in the command area having at least 2(two) years experience in their
line of business have the eligibility for applying this loan. Additional 2% per month on the overdue
charged as penal interest (amount if any). The tenor of the loan is maximum 36(thirty six) months.
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Tk. 2000/- to be realized at the time of disbursement of loan as a loan processing fee. Service charge
is 0.50% charged on loan amount to be realized at the time of disbursement of loan.
6. Contractors loan:
Individual, business Enterprises (Other than Public Limited Company) engaged in construction and
supply business can apply for this loan to execute work order awarded by Govt. / Semi Govt. &
Autonomous Bodies. Any business house in the command area having at least 2(two) years
experience in their line of business has the eligibility for this loan.
Additional 2% is charged per annum on the overdue amount as its service charge (if any). The tenor
for this loan is maximum 12(twelve) months. Taka. 2000/- to be realized at the time of allowing of
drawings as the processing fee of the loan. Service charge is 0.25% on loan amount to be realized at
the time of disbursement of loan maximum Taka. 5000/-.
7. Letter of guarantee:
Business Enterprises (Other than Public Limited Company) engaged in construction, supply and
other business can apply for this loan to participate in tender(s) invited by Govt. / Semi Govt. &
Autonomous Bodies and execute job against work order awarded from different agencies and for any
other obligation. Customer of the respective branch having business place in the command area with
at least 2(two) years experience on their line of business have the eligibility for application. The
margin is depending upon Banker-Customer relationship.
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9. Letter of credit:
Letter of Credit (LC) is a commitment or an undertaken or a guarantee of a bank to the exporter on
behalf of importer in regard to the payment of certain amount subject to the payment of certain
conditions. Therefore it's called conditional guarantee.
Business Enterprises (Other than Public Limited Company) can use this service to facilitate foreign
exchange or in some cases of local payment or goods transfer. Import or procurement of merchandize
1% on loan amount (Maximum Tk. 2000/-) to be realized at the time of disbursement of loan.0.25%
on loan amount to be realized at the time of disbursement of loan (Maximum Tk. 5000/-).
13. Project loan:
Business enterprises (Other than Public Limited Company) engaged in manufacturing/ service
industry can apply for this loan to set up new manufacturing/ service unit. To BMRE existing
manufacturing/ service unit. Firms/ companies incorporated in Bangladesh. The firm/ company
should have business account with the branch. The firm/ company should generate sufficient cash
flow from operation from which firms can make the repayment of the loan.
Penal interest is additional 2% per annum charged on the overdue amount. The tenor of the loan is
maximum 5(five) years including grace period. The length of grace period is to be determined on the
fund generation of the project.0.10% on loan amount (Minimum Tk. 2000/-) to be realized before
disbursement of loan. 0.25% on loan amount subject to minimum of Tk. 5000.00 to be realized before
disbursement of loan.
d. Consumer Financing
IFIC Bank Ltd. introduced Consumer Credit Scheme for its customer during 1999 duly approved by
the Board of Directors of the bank in their 251st meeting held on April 4, 1999 with the following loan
products:
Vehicle loan
Domestic appliances loan
Office equipment loan
Entertainment purpose loan
Loan for intangible loan
Guidelines under the prudential Regulation and Direction of Bangladesh bank have been formulated.
These guidelines will assist the branches as to how the CCs loan port-folio should be managed.
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The committee studied existing products available in the market. Considering the market demand
and investment opportunities in Consumer Financing Sector, the committee has formulated the
following 7 (seven) products for IFIC Bank to be launched under Consumer Financing Scheme:
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7.Auto Loan:
People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/
autonomous bodies; employees of commercial banks, foreign banks and other reputed financial
institutions; employees of reputed Multinational corporations and large local corporate; employees
of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other
salaried persons acceptable to the bank. The purpose of this loan is to purchase new or
reconditioned vehicles for personal use only but not for commercial use. Any Bangladeshi, holding
Bangladeshi originality having a bank account with IFIC Bank Ltd. with an age limit of twenty five
to sixty (25-60) is eligible for this type of loan.
8. Festival Loan:Extended to meet expenses of major religious festival like Eid, Puja, Christmas and
BuddaPurnima.
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Chapter 4
Lending Procedures followed by IFIC
Bank ltd.
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Step-1
A secured advance may be grant to a party only after getting a limit sectioned from the competent
authority.
Step-2
: Loan/Advance Proposal
For obtaining a loan/advance the party must make an application in standard form in writing to the
branch where he maintains his operative account. After receiving the application from the party, the
branch manager will take immediate steps to compile report regarding the party based on the
following sources of information:
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Personal investigation
Confidential supports from
Other banks,
Chamber of commerce
CIB from Bangladesh bank as the earnable.
Trading account P/C, B/S. M/A if' any and other documents submitted by the party.
The average balance and the present maintained in the account.
The nature of operations during the last six months and the date of opening account.
Step-3
The branch, may prepare a limit proposal after being fully satisfied with the following points:
The financial position of the party.
Purpose for which advance is required.
Nature of securities offered.
The payment arrangement.
Step-4
: Renewal Proposal.
Step-5
Step-6
: Disbursement of loan.
Step-7
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Regulation: 4
Aggregate exposure of bank on small enterprise sector
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The aggregate exposure of the bank on SE sector shall not exceed the limits as specified
below:
% of classified SE advances to total
Maximum limit
portfolio of SE advances
a. below 5%
b. below 10%
c. below 15%
d. up to and above 15%
10 times of equity
6 times of the equity
4 times of the equity
Up to the equity
Regulation: 5
Limit on clean facilities
In order to facilitate growth of smaller loans, banks are free to determine security requirements for
loans up to TK. 5 lac. Guidelines for security requirements for loans of amounts more than TK. 5 lac
are given in Regulation-6.
Regulation: 6
Securities
Consequent to the regulation stated in Regulation-5, facilities provided to SEs shall be secured by
banks as follows:
Below TK. 10 lac.
As a minimum banks must take charge over assets being financed.
For loan amounting TK. 10 lac and above.
a) Legal mortgage over immovable properties with registered Power of
Attorney.
b) Personal
Hypothecation
on
the
inventory,
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receivables,
advance
payments,
Regulation: 7
Loan documentation
For all facilities, banks must obtain (as applicable) and not limiting to following documents before
disbursement of loan can be made:
1. Loan Application Form duly signed by the customer.
2. Acceptance of the terms and conditions of Sanction Advice.
3. Trade License.
4. in case of partnership firm:
Copy of registered partnership deed certified as true copy or partnership deed on non-judicial
stamp of TK. 150 denomination duly notarized.
5. in case of limited company:
Copy of memorandum & Articles of Association of the company including Certificate of
incorporation duly certified by Register joint Stock Companies (RJSC) and attested by the managing
director accompanied by an up-to-date list of Directors,
6. Demand Promissory Note
7. Letter of hypothecation of stocks and goods
8. Letter of hypothecation of book debts and receivables
9. Letter of hypothecation of plant & machinery
10. Charge on fixed assets
11. Personal Letter of guarantee
Regulation:8
Margin Requirements
Banks shall adhere to the minimum margin requirement as prescribed by Bangladesh Bank (if
any).
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Regulation: 9
Credit information Bureau (CIB) clearance
While considering proposals for any exposure, banks should give due weights to the credit report
relating to the borrower and his group obtained from a Credit Information Bureau (CIB) of
Bangladesh Bank. The economics of obtaining CIB report will be governed by rules and
regulations as prescribed by Bangladesh Bank from time to me.
Regulation: 10
Minimum conditions for taking exposure
1. Banks shall, as a matter of rule, obtain a copy of financial statements duly e dited by a practicing
Charted Accountant, relating to the business of every borrower who is a limited company or
where exposure of a bank exceeds TK.40 lac, for analysis and re-record. However, financial
statements singed by the borrower will suffice where the exposure is fully secured by liquid
assets.
2. It is recognized that a large number of enterprises other than limited companies (I.e., sole
proprietorship/partnership firms etc.) may not have proper books of accounts including balance
sheet, profit & loss account and they may not be able to prepare current and future cash flows due
to lack of sophistication and expertise. It is expected in such cases, banks shall assist the
borrowers in obtaining/developing such books of accounts as performs/formats prescribed by
each bank. Reference with regard to how the formats should be prepared has been made in the
development guidelines.
Regulation: 11
Proper utilization of loan
The bank should ensure that the loans have been properly utilized by the SEs and for the same purpose
for which they were acquired / obtained. Banks should develop and implement an appropriate system
for monitoring the utilization of the loans.
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Regulation: 12
Registration on facilities to related parties
Banks shall not take any exposure on a SE in which any of its director, shareholder, employer or their
immediate family members are holding 5% or more of the share capital of the SE.
Confirmation from the concerned authority that no transfer of ownership will be allowed without
prior written consent of the Bank (Govt., Semi Govt., Autonomous Bodies, Corporation).
12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly
signed by the borrower. After 1 (one) year fresh cheque to be obtained along with memorandum of
deposit of cheques.
One cheque covering residual amount of loan duly signed by the borrower.
Memorandum deposit of cheques.
Assignment of work order.
Confirmation
from
Work
awarding
Authority
that
all
cheques
will
be
issued
in
Letter of arrangement
Letter of installment
Letter of disbursement
Personal guarantee of guarantor
Personal guarantee of Spouses/Parents
24 (twenty four) postdatedcheques in favor of Bank for payment of monthly installments each
duly signed by the borrower.
One postdated (expiry) blank cheque duly signed by the individual or proprietor.
Memorandum of Deposit of Cheque.
Letter of Hypothecation of vehicles
Memorandum of deposit of Title deed
Deed of mortgage registered with Sub-Register
Registered Power of Attorney to sell the mortgaged property without intervention of
court.
Letter of guarantee (i.e.)
Broad resolution to borrow fund including completion of documentation as per Memorandum &
Article of Association, (in case of private limited company)
Registration of vehicle with bank mortgage clause.
Comprehensive Insurance coverage with Bank mortgage clause.
Pledge of Financial obligation where applicable.
12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly
signed by the borrower. After 1 (one) year fresh cheques to be obtained along with memorandum of
deposit of cheques.
Personal guarantee of the Directors in case of Private Limited Company.
Personal guarantee of all the partners (in case of partnership concern).
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Insurance Policy.
Notarized Power of Attorney to sell the possession as per possession right deed in favor of Bank.
One blank cheque dated maturity date of loan duly signed by the borrower.
Tripartite agreement among the Bank, Lesser & Borrower to the effect that the Lessee and Lesser
cannot transfer possession right to the property without prior consent of the Bank (in case of the
private owner).
Letter of confirmation from the concerned authority that no transfer of ownership will be allowed
without prior written consent of the Bank (Govt., Semi Govt, Autonomous Bodies, Corporation.
Resolution of Board of Directors to issue guarantee including completion of documentation. (in
case of limited company)
Appropriate form of letter of lien on security (in case of financial obligations).
Letter of Pledge.
Letter of continuity
Lien Confirmation from issuing branch in case of FDR issued by our bank.
Lien Confirmation from issuing authority duly authenticated by the Head office of the issuing
bank in case of FDR issued by other banks.
NOC from competent authority for creation of legal mortgage in favor of the bank (if required)
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16. Once the credit facility is granted to any individual or group by business power delegated to
higher authority, exercise of lower authority by the subordinate will automatically stand ceased for
the same individual or group.
17. Any credit proposals that do not comply with guidelines regardless of amount may be referred to
managing director for decision.
18. A monthly summary of all new facilities approved, renewed, enhanced and a list of proposals
declined stating reasons thereof should be reported by CRM to MD.
Agriculture
12.00
2.
13.25
3.
14.75
4.(Ka)
4.(Kha)
14.75
5.
Exports
7.00
6.
Commercial Lending
14.75
7.
Housing Loan
8.
9.
Credit Card
2 (Per month)
10.
11.
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Others
14.75
Chapter 5
Loan Disbursement Process Of IFIC
bank limited
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Bank provides loan by collecting deposits and other sources of fund. This branch has various types
of loan disbursement programs. Before disbursing loan bank follows the following sanctioning
process.
5.1. Application for Loan:A borrowers first applies for loan to sanction certain amount of loan
allowing with certain required papers & documents.
5.2. Credit Investigation: Bank lends its depositors money; therefore, it is required to return
back in the ordinary course of business.
Selection of the borrower:A careful and systematic study of the affairs of the intending
borrower is needed to the right selection of borrower. Therefore lending banker should
analyze 5C of borrower- Character, Capacity, Capital, Collateral and Condition.
Lending Principles: The banker should consider lending principles. These are- Safety,
Security, Liquidity, Profitability, Purpose, National Interest, Diversity.
Personal Interview: For assessing attitude, Skill, Achievement needs, Knowledge etc.
Collect Information From Various Sources: Banks own record, borrowers loan
application, spot verification, reports from friends & relatives other sources.
5.4. Documentation:
The security offered for an advance is only a caution. A banker would not normally like to recover
the advance form the safe of security. A banker accepts properly as security, which is highly liquid,
easily realized, easily marketable, sound title, easy to store, stable in its market price.
The bankers create charge on the security by following methods:
Lien: It is the right to retain the property or goods of the borrower as security until the debt
are adjusted. In this case the banker can only hold the possession of the goods; he can sell
them after giving reasonable notice to the borrower.
Ledge: It is created only for movable property like goods, document etc. In case of it the
ownership of goods remains with the banker but possession of goods rests with the loan.
Mortgage: Only immovable properties are kept under mortgage total possession of the
property is not transferred, only the interest is transferred. In case the mortgager fail to repay
the loan the bank gets right to recover the debt out of the sale of the mortgage property.
Hypothecation: In this case both possession and ownership remains with the borrower.
Classification of securities:
Personal: Personal bond, promissory note, letter of acceptance etc.
Impersonal: Land, shares, building, stocks, goods etc.
Direct/Indirect: Direct security is deposited by the customer himself and the indirect is deposited
by the third parts.
- Advance against FDR.
- Advance against insurance policies.
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Collateral: It means these securities, which runs parallel to or side by side with personal right of
action against a debtor in respect of on advance. These types of securities are Share certificates,
bearers bind, insurance policies, and legal mortgage.
Guarantee: At times when the personal security and collateral is not considered sufficient to a
banker then he may ask for a guarantee of third party whose financial ability and credit is acceptable
to the bank.
Execution of Documents:
It is the procedure of stamping a document. If mistake arises it is to be cancelled. So it is to be
properly signed and correctly filled by the executants. The following are to be observed at the time of
execution The documents filled by the executants correctly.
Specimen signature.
The entire page is to be signed by all the executants.
Should not have cutting, overwriting.
Documents should be kept safely.
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5.5 Loan and advance disbursement of IFIC bank under the different categories:
5.5.1 Loan disbursement of IFIC bank under Residual maturity grouping of Loans,
cash credit, overdraft, etc. for last 5 years
On
demand
Up to 1
month
Over 1
month but
not more
than 3
months
Over 3
moths but
not more
than 1
years
Over 1
year but
not more
than 5
years
Over 5
years
Total
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2014
2013
2012
2011
2010
2,780,772,670
14,098,217,646
866,432,305
66,516,511
10,784,108
19,451,349,311
5,157,221,187
12,556,177,758
14,662,272,312
30,295,350,45
2
24,099,900,703
30,318,215,451
26,737,679,805
25,072,696,00
9
20,186,085,450
12,166,210,00
1
21,187,528,964
11,983,418,202
13,358,101,48
9
12,988,118,766
4,715,294,024
8,238,837,006
5,350,551,378
7,567,181,655
7,300,551,089
------
94,532,881,160
77,989,360,530
77,159,761,91
0
64,641,172,520
47,563,427,88
2
14,549,496,32
2
16,121,643,42
7
35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
0
2014
2013
2012
2011
2010
On demand
Up to 1 month
Over 5 years
Figure:Loan disbursement of IFIC bank under Residual maturity grouping of Loans, cash credit, overdraft, etc.
for last 5 years
Interpretation: From the above figure and table we can say that the highest loan is given under the
over 3 years but not more than 1 years category.And the loan amount under this category is
increasing continuously in the last five years. And the highest loan has given under this category is
30,318,215,451 taka in the year 2014.The lowest amount of loan has given under on demand loan.
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5.5.2 Loan disbursement of IFIC bank under broad categories for last 5 years
2014
Loans
2013
2012
2011
2010
45,539,838,321
Cash
25,443,140,268
credit
Overdrafts
23,549,902,570
7,129,391,285
Bill
7,749,268,149
6,121,024,498
6,900,219,263
2,457,518,485
102,282,149,309
84,110,385,028
7,082,998,135
purchased
and
discounted
Total
120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0
2014
Loans
2013
Cash credit
2012
Overdrafts
2011
and discounted
Figure: Loan disbursement of IFIC bank under broad categories for last 5 years
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2010
Interpretation:The above table and graph shows that the loan given loan amountunder cash
credit, over draft, loans, bill purchased has increased consistently throughout the last five years.
And the highest loan amount has given under loan is 45,539,838,321 in the year 2014 and the
secondhighest has given under cash credit is 25,443,140,268 in the year 2014.So the IFIC bank
limited focus more on direct loan more than others under this category.
5.5.3 Sector wise Loan disbursement of IFIC bank Inside Bangladesh for last 5
years:
2014
2013
2012
2011
2010
Corporate Finance
75,129,166,107
54,785,769,1
97
51,980,903,
779
42,767,798,
416
30,733,401,
883
Agricultural Finance
245,384,106
176,513,48
643,452,00
9
350,650,07
8
409,217,356
Consumer Finance
4,965,266,994
4,834,548,01
1
5,217,728,7
33
5,069,057,9
54
3,935,976,2
23
19,054,493,358
21,428,379,2
37
19,238,841,
227
16,432,437,
551
10,841,828,
435
Capital Market
Division (CMD)
1,641,103,6
10
Women
Entrepreneurs loans
Others
2,887,838,745
2,885,175,15
5
Total
102,282,149,310
84,110,385,028
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78,836,162
21,228,521
1,900,375
77,159,761,
910
64,641,172,
520
47,563,427,
882
80,000,000,000
70,000,000,000
60,000,000,000
50,000,000,000
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0
2014
2013
2012
2011
2010
Figure: Sector wise Loan disbursement of IFIC bank Inside Bangladesh for last 5 years
Interpretation:Above graph shows the sector wise loan disbursement of IFIC bank limited. And the
highestamount of loan is given under corporate finance in the last five years. And the second highest
is given under SME category. But under women entrepreneurs loan they are given little amount of
loan. So the IFIC bank ltd focus on corporate sector to give the loan.
45 | P a g e
5.5.4 Industry wise Loandisbursement of IFIC bank including bills purchased and
discountedfor last 5 years
Agriculture
Industries
Jute Industries
Textile
Industries
Garments
Industries
Chemical and
Chemical
Products
Cement
Industries
Bricks &
Ceramic
Food Products &
Processing
Engineering &
Metal
Pharmaceuticals
Hospital &
Clinics
Paper & Paper
Products
Industries
Other Small
Industries
IT Sector
Other Service
Industries
46 | P a g e
2014
1,417,338,319
2013
773,386,022
2012
643,452,009
2011
350,650,498
2010
409,217,356
997,218,400
5,481,881,249
390,808,925
866,346,211
2,282,418,07
5
15,590,763,9
76
447,556,237
561,742,083
3,114,376,59
3
9,589,721,40
3
553,110,578
528,251,471
3,605,002,10
8
8,966,971,85
8
282,943,600
557,685,358
3,089,879,48
0
7,543,523,48
5
1,656,395,29
9
154,927,183
399,080,786
500,392,100
503,531,422
56,426,769
903,449,269
912,395,523
925,514,831
587,714,346
331,388,736
4,316,476,475
1,704,088,65
1
2,665,602,40
2
337,219,412
1,073,108,38
2
522,071,015
3,035,310,71
6
2,740,307,11
8
422,385,717
1,277,563,32
2
675,221,359
2,168,407,02
6
1,859,454,76
2
283,598,996
1,046,458,30
1
620,236,306
1,656,033,68
4
1,216,886,06
8
311,711,840
1,074,867,47
5
466,045,163
4,581,914,78
1
272,763,543
4,074,403,56
2
1,265,965,37
5
152,569,065
1,965,241,85
3
1,203,305,96
4
89,895,770
630,967,121
1,013,534,17
1
278,434,194
331,781,662
14,867,703,440
4,407,699,797
128,867,260
449,762,044
8,277,723,856
3,820,211,434
5,590,918,579
Trade &
Commerce
IFIC Securities
22,938,039,072
Transport
Construction
Firms/Companis
Housing
747,205,356
3,913,317,258
Cold Storage
Non-Banking
Financial
Consumer
Finance
Energy
110,746,160
638,479,766
1,199,738,281
9,306,094,561
5,647,268,264
3,562,960,031
Telecommunicati
on
Others
1,541,695,871
Total
102,282,149,309
1,471,618,458
21,180,194,1
03
1,280,703,90
2
726,798,172
4,111,287,61
5
6,797,505,52
2
124,959,002
355,893,722
5,186,254,42
3
2,329,323,56
4
1,289,532,66
1
4,224,813,76
4
84,110,385,0
28
22,620,302,7
21
1,452,144,53
0
211,333,100
3,732,043,46
4
7,601,449,94
5
137,244,902
1,227,580,79
2
5,217,728,73
3
1,358,673,02
3
637,822,892
19,654,444,5
20
1,393,587,66
7
310,615,510
5,638,372,41
9
2,783,680,02
7
147,060,417
1,560,649,96
6
5,069,057,95
4
472,337,797
12,312,629,6
66
1,641,103,61
0
346,791,084
4,588,339,79
0
528,502,745
296,674,279
280,239,848
5,540,563,68
6
77,159,761,9
10
4,587,302,41
5
64,641,172,5
20
1,671,675,39
0
47,563,427,8
82
159,627,267
1,544,148,02
8
3,935,976,22
3
560,583,491
120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0
2014
2013
2012
2011
2010
Figure: Industry wise Loandisbursement of IFIC bank including bills purchased and discounted for last 5 years
Interpretation:Above graph shows the industry wise loan disbursement of IFIC bank limited. And
the highest amount of loan is given in the trade and commerce industry in the last five years. And the
47 | P a g e
second highest is given in the garments industry in the last five years. And the highest amount of
loan in trade & commerce industry is22,938,039,072 in the year 2014 and the loan amount is
increasing day by day in this industry. So the IFIC bank ltd focus on trade and commerce industry to
give the loan
Chapter 6
Loans Recovery Process of IFIC
Bank Limited
48 | P a g e
In case Borrower fails to come forward or shows reluctance, Bank is to take various steps to recover
its assets, safeguard its possible losses and overcome crisis of the situation due to non-recovery. IFIC
Bank follows some guidelines and procedure to recover its losses and over-come the obstacles. Like
followings Close monitoring during validity/repayment period of loan.
Gear up persuasion right from initial stage of its default/non-payment of installments.
Understanding reasons of non-payment to obviate the problem.
Constant follow-up with defaulting borrowers.
Take effective steps to save the loan from turning it to NPL.
Relationship Manager (RM) must try to identify reasons of default of loan non-payment and find out
ways to get the loan recovered/regularized.
Policy objectives of IFIC BANK for recovery of loans and advances are to:i) Ensure normal flow of income by taking appropriate measure so that loans are not converted to
Non-Performing Loans (NPL).
ii) Recover stuck-up loans and advances entirely.
iii) Maximize Banks earning by converting Non-Performing Loans (NPL) to regular loans
through re schedulement.
iv) Reach to an amicable settlement duly protecting interest of the Bank.
v) Take timely legal steps as per law in enforce to avoid law of limitation.
vii) Adhere to Bangladesh Bank policy guidelines.
The Remedial Asset Management (RAM) directly manages accounts which sustained deterioration (a
Risk Relating to Sub-Standard or worse). Whenever an account is handed over from Relationship
Manager to RAM, a Handover/Downgrade Checklist (Appendix-2) shall be completed.
The RAMs primary functions are:
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views. Simultaneously, RM will review all documentation, meet the Customer and prepare a
Classified Loan Review (CLR) within 15(fifteen) days after the completion of Handover/ Downgrade Check List and forward it to RAM for its approval.
Remedial Asset Management shall ensure that the following steps are carried out when an account is
classified as Sub-Standard or worse:
Facilities are withdrawn or repayment is demanded as appropriate. Any drawings or
advances shall be restricted and disbursement/drawing can only be approved after careful
scrutiny and approval from appropriate executives within CRM.
CIB reporting is updated according to Bangladesh Bank guidelines and the borrower Risk
Grade is changed as appropriate.
Loan loss provisions are taken based on Forced Sale Value (FSV).
Loans are only rescheduled as per Loan Rescheduling guidelines of Bangladesh Bank.
Any rescheduling shall be based on projected future cash flows specifically deter-mined.
Prompt legal action shall be taken if the borrower does not cooperate.
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the Bank loan was sanctioned which is undesirable. Furthermore, there are willful defaulting
borrowers as well.
Depending on the nature of the borrower involved, the style and degree of persuasion shall differ
from case to case keeping in mind that the ultimate aim is to recover and settle defaulting loan within
the shortest possible time with a view to ensuring maximum return for Bank. Various modes of
persuasion are as under:
Letters/reminders:
In case of continuous loans like Cash Credit (Hypo), Cash Credit (Pledge), Secured Overdraft etc.
letters/ reminders are to be sent two months ahead of expiry date of limit to get response of the
borrower whether they are interested for renewal of the limit. In case of unsatisfactory performance
of the account, a letter shall be issued to the concerned borrower allowing 30(thirty) days time to
repay Banks dues with interest. In case of Term Loan Accounts, such letters shall be sent to the
borrowers as soon as one installment remains unpaid urging them to regularize their account. Copy
of such letters shall be endorsed to the Guarantors/mortgagors if any. Reminders are required to be
sent on fortnightly/monthly intervals. Constant follow up through letters shall be made to the
borrowers availing Demand Loan, LIM, LTR and for PAD outstanding to regularize their account
and to avoid classification.
Inspections/Site-visits:
Concerned Branch / RM shall collect information regarding reasons of default through personal
contact / visit etc. Branch Officials shall inspect the shop/factory/residential address of the borrower
to ascertain the position of their business and reason of failure. They will submit report along with
their findings. On the basis of their report and information provided by the borrower Branch/RM
shall ascertain the reasons of default. Branch/RM shall also assess the valuation of securities held
against the advance if such information is not updated.
Negotiation:
Branch/RM will, then, start persuasion/negotiation with the borrower and try to resolve the issue. In
the process of negotiation, following measures may be considered subject to approval of the
competent authority: a) Possibility of adjustment within a shorter time frame.
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6.7Reschedulement
Bangladesh Bank has laid down prudential guidelines which are to be followed by the IFIC Bank for
reschedulement of loans.
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6.9 Loan Recovery from Loan disbursement of IFIC bank for the last five years:
2014
2013
2012
2011
2010
102,282,149,30
84,110,385,02
77,159,761,91
64,641,172,52
47,563,427,88
disbursemen 9
t
Loan
100134224174
81654361785
74806389172
62061989736
45689428823
Recovery
Percentage
97.90%
97.08%
96.95%
96.01 %
96.06%
Loan
of Recovery
Loan Recovery
97.90%
97.08%
2014
2013
96.95%
2012
96.01%
96.06%
2011
2010
Figure:Loan Recovery from Loan disbursement of IFIC bank for the last five years
Interpretation: Above graph shows that loan recovery is 97.90% in 2014, 97.08% in 2013, 96.95% in 2012,
96.01% in 2011 and 96.06% in 2010.From recovery result, we can say that they are rapidly recovering most of
57 | P a g e
the loan disbursed. It is a positive mark for IFIC bank limited. And in the year 2014, they recover highest
amount of loan amount. So we can say that IFIC bank credit management system is more active and strong.
Chapter 7
Problems in loan and advance process
of IFIC bank limited
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While working at International Finance Investment & Commerce Bank Limited, in Konapara
BranchI have attained a newer kind of experience. After collecting and analyzing data I have got
some findings and recommendations. These findings are from the personal points of view, which are
given below:
A. All the employees are not professionally trained enough in the computer literacy part. For
credit appraisal, the bank some time depends on the client for its authentication.
B. According to the annual report published by the IFIC Bank Ltd in 2013, Recovery rate of
loans and advances is satisfactory in comparison to the Industry. Recovery rate of Konapara
branch is more than 85%.
C. Credit investigation is not conducted to cover almost all the associated credit risk. It is not
possible to measure al the external variables affecting the credit.
D. Credit officer depends largely on the balance sheet and income statement figure supplied by
applicants. Sometimes financial statements supplied by credit officer cannot be relied upon.
E. Most of the borrower does not pay their payment timely.
F. Most of the clients are under graduate and unable to understand the term and conditions, as a
result they fail to understand that when they have to repay the loan, even after repeating them
G.
employees.
H. Loans and advance department take a very long time to sanction a loan; as a result they are
losing the clients.
I. Sometimes the employees overvalued the mortgage property, As a result if the client fails to
repay the loan the bank authority cannot collect even the principal money invested by the
J.
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Chapter 8
Recommendations
60 | P a g e
A. Strict Supervision must be adapted in case of high risk borrowers. Time to time visit to the
projects should be done by the bank officers.
B. The average number of days required for sanctioning and disbursement of credit against
specific loan proposal should be reduced.
C. The performance evaluation system is not updated. The organization should follow the 360degree performance evaluation system. In this case, the superior executives will not be much
rude to the subordinates because the top-level employees performance will be evaluated by
the subordinates.
D. Selection of borrower shall be made as per rules and procedures of the advances and after
making proper assessment of business establishment, respectability, creditability, actual
requirement of fund repayment capacity etc. Appraisal of feasibility and viability of the
projects shall be done in proper manner examining all the factors by an efficient and
qualified appraiser so that no difficulties are faced at any stage of the project from
construction to production stage.
E. The bank should not always be very much sensitive of recovery of loans and will not bring
necessary pressures for recovery provided the borrowers are incorrigible and habitual
defaulters. The lenders shall not resort to any hasty decision and take legal action against the
borrowers if there is any scope for recovery of the dues on compromise terms even by
allowing some concession of interest and rescheduling the repayment program by allowing
F.
G.
H.
I.
J.
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disbursed in proper time of investment to ensure recovery of the loan in time from the
borrowers.
Chapter 9
Conclusion
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Form the learning and experience point of view I can say that I really enjoyed my internship period
in IFIC Bank Ltd. from the very first day. I am confident that this 3 (three) months internship
program will definitely help me to realize my further carrier in the job market.
Loans & Advances of a bank is not so sufficient to measure and express perfectly within this short
time of my internship period. But it is a great opportunity for me to get used to with the Loan &
Advance Procedure of commercial banking of IFIC Bank. I have tried by soul to incorporate the
necessary relevant information in my report.
The selection and the awareness about the loans type is one of the key determinants of the right and
proper use of fund. The loan default in the banking sector of our country has been hindering the
growth of the economy. The problem has also been reducing the level of investment, the productivity
of capital and the volume of savings. In managing loans and advances of the commercial banking
sectors, the critical factors are needed to be identified and managing of those factors will have
positive impact on the overall banking sector. The analyzed factors are not the only determinants of
the loans and advances as well as the selection procedure. In this study, several qualitative factors
are considered and casual relationship of types of loan and the selection procedure, compliance with
covenants by borrowers and strength of supervision is established. The study was conducted by using
the data of the Bank. So, findings of this study are not applicable in the macro environment but
further study can be conducted on the basis of the findings of the report.
During the course of my practical orientation I have tried to learn the practical banking to relate it
with my theoretical knowledge, what I have gathered and going to acquire from various courses.
.
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References
1) Annual Report of IFIC of year 2009,2010,2011,2012,2013,2014
2) Manual and brushier of IFIC bank.
3) Eugene F. Brigham, joel F. Houston ; Fundamental of financial management;9 th edition.
4) www.ific-bd.com
5) www.google.com
6) Website of Bangladesh Bank
7) A Journal Banking published by IFIC BANK LTD.
8) Several Booklets from IFIC BANK LTD
9) Several News letters fromIFIC BANK LTD
Appendix 1
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1
2
3
4
5
6
7
Particular
Paid up capital
Total capital
Capital surplus
Total assets
Total deposits
Total loan & advances
Total
contingent
liabilities
2014
4,377,499,280
11,308,447,906
151,078,903
156,338,637,021
129,745,805,362
102,282,149,309
& 47,824,432,743
2013
3,806,521,120
9,630,845,996
339,309,207
132,062,628,567
110,463,796,836
84,110,385,028
42,304,360,063
8
9
commitments
Credit deposit ratio
78.83%
Percentage of classified loan against 4.95%
76.14%
3.77%
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
1,544,733,051
5,061,133,652
1,966,388,319
108,665,348
6.79%
132,838,447,524
23,500,189,497
7.22%
1.07%
2,377,463,292
3.53
36.76
10,628,115,868
24.28
10.17
1,345,490,024
3,168,075,634
1,620,060,000
373,995,151
6.88%
109,474,123,577
22,588,504,991
7.16%
1.09%
2,168,408,245
3.07
39.47
9,097,850,797
23.90
23.43
25
(NOCFPS)
Price earnings ratio (Times)
7.40
11.16
Appendix 2
Milestones in the development of IFIC BANK
1976established as an Investment & Finance Company under arrangement of jointventure with the
Govt. of Bangladesh.
1980commenced operation in Foreign Exchange Business in a limited scale.
1982 obtained permission from the Govt. to operate as a commercial Bank, Set up its first overseas
joint venture (Bank of Maldives Limited) in the Republic of Maldives (IFICs share in Bank of
65 | P a g e
2011established a fully owned subsidiary exchange company named IFIC MoneyTransfer (UK) Ltd.
2012 inauguration
of 100th
Business
Risk Branch at Tejgaon-Gulshan Link Road in Dhaka
Supply Risk
Industry Risk
Industry Risk
Sales Risk
Company Risk
Appendix 3
Performance Risk
Figure: Shows the
Components that analyzed in the LRA
Company
Reliance Risk
Management Risk
Mgt. Integrity Mgt. Competence Risk
Security Risk
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