Letter of Transmittal

To
Ashik-Uz-Zaman,
Lecturer
Department of Accounting &Information Systems,
Bangabandhu Sheikh MujiburRahmanScience & Technology University,
Gopalganj- 8100
Subject: Submission of the report on ‘Evaluation of CC Loan and Overall performance of
NBL,Gopalgonj Branch, Gopalgonj.’

Dear Sir;
With due respect,I beg to inform you that, I am a student of Department of Accounting &Information
Systems, at Bangabandhu Sheikh MujiburRahman Science & Technology University. The Report is
prepared on ‘Evaluation of CC Loan and Overall performance of NBL, Gopalgonj Branch,
Gopalgonj’. I have given my best effort to prepare the report with relevant information that I have
collected from National Bank Ltd. and from others sources during my internship program from
01October, 2019 to 31December, 2019.

I pray and hope that, the mistake of the report may have, will be kindly excused. Lastly, I beg your
kind consideration for evaluating this report.

Thanking you very much indeed

Sincerely Yours,

---------------------
Ayesha Khanam
ID: 20150112028
Year: 4th, Semester: 2nd
Session: 2015-16
Department of Accounting &Information Systems,
Bangabandhu Sheikh MujiburRahmanScience & Technology University,
Gopalganj-8100
Student’s Declaration

I am Ayesha Khanam, hereby declare that the presented report of my internship titled ‘Evaluation of
CC Loan and Overall performance of NBL’. It is uniquely prepared by me internee at National
Bank Limited, Gopalgonj Branch.

I confirm that, the report is only prepared for my academic requirement not for otherwise purpose. It
might be with the interest of opposite party of the corporation.

---------------------
Ayesha Khanam

ID: 20150112028
Year: 4th, Semester: 2nd
Session: 2015-16
Department of Accounting &Information Systems,
Bangabandhu Sheikh Mujibur Rahman Science & Technology University
Gopalganj-8100
Supervisor’s Certificate

It is my pleasure to certify that, Ayesha Khanam, a student of Department of Accounting &Information

Systems, Bangabandhu Sheikh MujiburRahman Science & Technology University, has been
completed the Internship Program at National Bank Limited on ‘Evaluation of CC Loan and Overall
performance of NBL’ Successfully with acceptable performance under my supervision from October
2019 to December 2019.

I wish him success in his life.

---------------------
Ashik-Uz-Zaman
Lecturer
Department of Accounting &Information Systems,
Bangabandhu Sheikh MujiburRahmanScience & Technology University,
Gopalganj-8100
Certificate of Approval

This is to certify that Ayesha Khanam, ID. 20150112028, has prepared her internship report titled
‘Evaluation of CC Loan and Overall performance of NBL’ in Gopalganj Branch, under my
supervision and guidance. I do hereby approve the style and contents of this internship report. This is
for the partial fulfillment of her four years BBA program, major in Accounting& Information Systems
from Bangabandhu Sheikh Mujibur Rahman Science & Technology University.

I wish her every success in life.

----------------------
Ashik-Uz-Zaman
Lecturer
Department of Accounting &Information Systems,
Bangabandhu Sheikh Mujibur Rahman Science & Technology University,
Gopalganj-8100
Acknowledgement

First I would like to express my gratitude to almighty God to give me the strength to complete the
report within the specific time.
I am also grateful to my course instructor & supervisor Ashik-Uz-Zaman, Lecturer, Department of
Accounting &Information Systems, Bangabandhu Sheikh Mujibur Rahman Science & Technology
University for giving me valuable advice and suggestions to complete the report in an appropriate
manner.
My sincere gratitude goes to all employees of National Bank Ltd. Gopalganj Branch for their cordial
attitude and helping hand guides me in all situations during my tenure in the bank. My special thanks
go to Md. Abdul Hannan, Branch Manager. I am also grateful to Md. AlaUddin & Imtiaz Hossain, First
Executive Officers (Credit Department). I would also like to thank Md. Dedarul Islam & Md. Hachibur
Rahman, Junior Officers (General Department) of NBL Gopalganj Branch for providing me the
necessary information that I need to prepare my report.
This report would not be possible without co-operation of all the officers of National Bank Ltd.
Gopalgonj Branch. So my heartiest appreciation goes to those officers. Finally I would like to thank all
the other who’s strong support make me able to complete this report.

---------------------------
(Ayesha Khanam)
Executive Summary
Banks are most active financial intermediary in today’s world. As a financial institution bank mainly
operate to communicate among persons and effectively works as safeguard among them in this age
globalization. Bank faces many of risk like credit risk, reputation risk, liquidity risk, and market risk
etc. credit risk is one of the major risks of them. To manage the risk they take various kinds of steps.
This report is based on ‘Cash Credit’ Loan Evaluation and Overall Performance is given on the
National Bank Limited (Gopalganj Branch). Here both primary and secondary sources of data are used.
Personal observation and consultation with the concerned personnel is key sources of data.
Risk is inherent in all aspects of a commercial operation; however for banks and financial institutions,
credit risk is an essential factor that needs to be managed. Credit risk is one of the major risks faced by
the Bank. This can be described as potential loss arising from the failure of a counter party to perform
according to contractual arrangement with the Bank. The failure may arise due to unwillingness of the
counter party or decline in economic condition etc.
This study mainly tries to find credit policy, credit approval process also find out credit disbursement
credit allocation.
This study also finds that credit risk management needs to be a robust process that enables banks to
proactively manage loan portfolios in order to minimize losses and earn an acceptable level of return
for shareholders.

6
 Table of Contents
Sl. No Contents Page No
Letter of Transmittal
Student’s Declaration
Supervisor’s Certificate
Certificate of Approval
Acknowledgement
Executive summary
Chapter One
Introduction
1.1 Introduction
1.2 Objectives of the study
1.3 Scope of the study
1.4 Methodology of the study
1.5 Limitations of the study
Chapter Two
About National Bank
2.1 History of NBL
2.2 Profile of NBL
2.3 Vision
2.4 Mission
2.5 Goal of the Bank
2.6 Management Style
2.7 Products and Services of NBL
2.7.1 Deposits Product
2.7.2 Credit Products
2.7.3 Cards Products
2.8 Organizational Strategies
2.9 Objectives of NBL
2.10 Management Structure of NBL
2.11 About National Bank, Gopalganj Branch
2.11.1 Branch management Organogram
2.11.2 Highlight of the branch
Chapter Three
Credit
3.1 Definition of Credit
3.2 Importance of Bank Credit
3.3 Loan Management System of NBL
3.4 Credit Principles of NBL
3.5 Loan Facility Parameters of NBL
3.6 Loan Repayments and Amortization of NBL
3.6.1 Loan Amortization
3.7 Numerical judgments: Borrower Selection
3.8 Credit Screening Procedure
3.9 Credit (Loan & Advance) Approval Procedure
3.10 Securities Accepted against Loan by NBL
3.10.1 Security against Loan
3.10.2 Securities & Provision
3.10.3 Categories of loan
3.11 Types of Credit
3.12 Interest Rate of Various Credits Offered by NBL
7
3.13 Definition of Loan/Credit Policy
3.13.1 Credit Operations
3.13.2 Applicant Borrower
3.13.3 Advance Department of Branch/Branch Manager
3.13..4 Credit Division
3.14 Factors Influencing Loan/Credit Policy
3.15 Sources of Credit Information
3.16 Important Points for Selecting Good Borrower
3.17 Credit Analysis
3.17.1 Major Issues/Questions Analyzed/Examined in Credit Analysis
3.17.2 Purpose of the Loan
3.18 Security for Loans and Advances
3.19 Loan amount/Loan terms and conditions/Loan documents
3.20 Procedure of Making Loan
3.21 Information Sheet
3.21.1 Application for Loan
3.21.2 Collecting CIB Report from Bangladesh Bank
3.21.3 Feasibility Study
3.21.4 Making Loan Proposal
3.21.5 Project Appraisal
3.22 Techniques of Project Appraisal
3.23 Head Office Approval & Sanction Letter
3.23.1 Head Office Approval
3.23.2 Sanction Letter
3.24 Disbursement of Loan and Charge Documents
Chapter Four
Cash Credit (Hypothecation)
4.1 CC (H)
4.2 Attributes of CC (H)
4.3 Simple Overview of Cash Credit (hypo) of National Bank
Limited, Gopalganj Branch
4.4 CC (H) Loan Limit
4.5 Sectors of Loan
4.6 Security
4.7 Working Capital Assessment
4.8 Credit Worthiness
4.9 Now What Includes in CRG?
4.10 Money Lending Procedure of National Bank Limited,
Gopalganj Branch
4.11 CRMD of NBL & Practice of NBL
Chapter Five
Financial Performance of Gopalganj Branch
5.1 Budget and achievement (Figure in Lac taka)
5.2 Profitability, Performance and Growth analysis
5.3 Financial Information (Figure in Lac Taka)
5.4 Position of loan and advance with analysis as on 03.07.2019
5.5 Breakup of classified advance as on 31.12.2018
5.6 Breakup of classified advance as on 30.06.2019
5.7 Recovery Position against classified advance
5.8 Year wise deposit Mix of the branch
Chapter Six

8
 Recommendation and Conclusion
6.1 Recommendations
6.2 Conclusion
References

9
Chapter One
Introduction

10
1.1. Introduction
Banking sector of the world contributed in the present global economy. To establish a strong banking
sector it is required to have good study in banking operations. Today’s Economic policy is concerned to
obtain the optimum economic condition in a country’s economy. Banking sector and banking activity are
playing a vital and important role to achieve that optimum goal of the economy. The successful running of
banking business depends upon effective banks. As a commercial bank NBL has a huge responsibility to
ensure efficient and effective banking operation all over the Bangladesh in a sound manner with the other
banks as a competitor.

Banking sector is indispensable in a modern age and modern society. It always plays a vital role to the
economic development of the country. In modern age of science and technology the banking sector all
over the world has been undergoing a lot of change due to deregulation, technological invention and
globalization. But Bangladesh banking sector is lagging to keep pace with the other countries it adapts the
changes. Basically banks take deposit from the customers against some interest payment and lend the
money to the borrowers with a different interest rate and time period. To ensure safety of the depositors
fund there are various types of credit facility. Also bank must hold adequate fund to meet the daily needs
of the clients.

1.2 Objectives of the study

The main objective is to identify the credit risk management system of National Bank Ltd .Specific
objectives are as follows:

 To know about the credit policy guidelines of National bank Ltd.

 To have an in-depth idea about credit assessment and credit information.
 To evaluate the overall credit facilities and administration of National Bank Ltd., Gopalgonj
branch, Gopalgonj
 To analyze the performance of loan of the branch.
 To find out some problems regarding credit assessment of the bank
 To prescribe some suggestions to overcome the problems.

11
1.3 Scope of the study

The study would focus on the following areas of National Bank Limited: Credit management system of
National Bank Limited, Procedure for different credit facilities, and Portfolio (Loan or advances)
management of National Bank Limited, Organization structures and responsibilities of management.

1.4 Methodology of the study

Sources of information: Both primary and secondary sources of information were used to complete this
report.

I. Types: The study is descriptive in nature. This report has been prepared on the basis of
experience gathered, during the period of internship. For preparing this report, I have also
obtained the information from annual report and website of the National Bank Ltd and from
conducting unstructured questionnaire survey.

II. Design: The purpose of the study was to investigate overall scenarios about contributions,
potentiality, profitability and risks of NBL. Therefore, descriptive approach is selected.

III. Sources of Data: This report is based on both primary & secondary source of information.
For theoretical development of this paper, data have been collected from the various sources
like different publications, library sources, books, articles, etc.

The primary sources are-

 Officers

 Supervisors

 Customers of the bank

The secondary sources are –

 Annual Report 2009 to 2013 of National Bank Ltd.

 NBL website “ www.nationalbankbd.com ”
 Periodicals published by the Bangladesh Bank

12
 IV. Data collection procedure:

 Primary Data: Primary data were collected by structured questionnaire.

 Secondary Data: Secondary data were collected from their Annual Report and the
website“www.nationalbankbd.com” and periodicals published by the Bangladesh
Bank, Different publications regarding Banking functions, operation, and transactions
policies.
V. Data Analysis and report writing:

Collected data were analyzed and presented in the form of bar design and pie chat etc. Different types of
software like Ms-Excel, Ms-Word etc. are used to prepare accordingly in the form of word format.

1.5 Limitations of the study

1) Anything, which will adversely affect the image of the bank, could not be disclosed.
2) National Bank Limited (NBL) is a private bank and they are conservative about their data as a
result it was not possible for the report to get all the data required.
3) Sometimes the officials had been unable to provide information because of their huge routine
work.

13
 Chapter Two
About National Bank

14
2.1 History of NBL
National Bank Limited has its prosperous past, glorious present, prospective future and under processing
projects and activities. Established as the first private sector bank fully owned by Bangladeshi
entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after
facing many stress and strain. The members of the board of directors are creative businessmen and
leading industrialists of the country. To keep pace with time and in harmony with national and
international economic activities and for rendering all modern services, NBL, as a financial institution,
automated all its branches with computer networks in accordance with the competitive commercial
demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been
rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to
NBL. At present we have 145 branches under our branch network. In addition, our effective and
diversified approach to seize the market opportunities is going on as continuous process to accommodate
new customers by developing and expanding rural, SME financing and offshore banking facilities. We
have opened 10 branches and 5 SME/Agri branches during 2012.

The emergence of National Bank Limited in the private sector was an important event in the Banking area
of Bangladesh. When the nation was in the grip of severe recession, the government took the farsighted
decision to allow the private sector to revive the economy of the country. Several dynamic entrepreneurs
came forward for establishing a bank with a motto to revitalize the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private
sector. From the very inception, it was the firm determination of National Bank Limited to play a vital
role in the national economy. We are determined to bring back the long forgotten taste of banking services
and flavors. We want to serve each one promptly and with a sense of dedication and dignity. The then
President of the People's Republic of Bangladesh Justice AhsanuddinChowdhury inaugurated the bank
formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started
commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj,
Chittagong.At present, NBL has been carrying on business through its 130 branches and 15 SME / Agri
Branches (total 145 service locations) spread all over the country. Since the very beginning, the bank has
exerted much emphasis on overseas operations and handled a sizable quantum of home bound foreign
remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as
with 37 overseas Exchange Companies located in 13 countries. NBL was the first domestic bank to
establish agency arrangements with the world famous Western Union in order to facilitate quick and safe
remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has
meant that the expatriates can remit their hard-earned money to the country with much ease, confidence,
safety and speed.

15
NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In
the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest
information technology services of SWIFT and REUTERS. NBL has been continuing its small credit
programmers for disbursement of collateral free agricultural loans among the poor farmers of Barindra
area in Rajshahi district for improving their livelihood.

NBL focused on all key areas covering capital adequacy, maintaining good asset quality, sound
management, satisfactory earning and liquidity. As a consequence, it was possible to a record growth of
175.51 percent with Tk. 8,809.40 million pretax profits in the year under review over the preceding year.
The net profit after tax and provision stood at Tk. 6,860.34 million which was Tk. 2,070.47 million in the
previous year registering a 231.34 percent rise. The total deposits increased to Tk. 102,471.83 million
being 33.37 percent increase over the preceding year. Loans and advances stood at Tk.92, 003.56 million
in the year under report which was Tk. 65,129.289 million representing 41.26 percent rise over the
preceding year. Foreign trade stood at Tk. 144,255.00 million in 2010 compared to Tk. 115,939.00
million, increased by 24.42 percent compared to that of the previous year. During 2010, the bank handled
inward remittance of Tk. 49,145.30 million, 10.73 percent higher than that of the previous year. Return on
Equity (ROE) registered a 77.84 percent rise over the preceding year.

National Bank, has now acquired strength and expertise to support the banking needs of the foreign
investors. NBL stepped into a new arena of business and opened its Off Shore Banking Unit at Mohakhali
to serve the wage earners and the foreign investors better than before

16
2.2 Profile of NBL
Name of the organization: National Bank Limited
History: National Bank Ltd. was created and commencement of
business started on 23rd March 1983.
Year of establishment: 1983
Nature of organization: Private Commercial Bank.
Products: Banking Services, Retail Banking, Corporate Banking,
Investment Banking, Islamic Banking, ATM Services
Shareholders: Main shareholders include leading Industrialists and business
Magnets of the Country. The Board of Directors consists of 13
Members. Most of the directors are Owner of large business
groups.
Website: https://www.nblbd.com
Customers: Business Enterprise and Individuals
National Bank Limited 18, Dilkusha Commercial Area,
Head office: Dhaka-1000, Bangladesh
Phone: 88-02-9563081-5, 88-02-9587464-5, 88-02-9587467,
8802-9550823-5

2.3 Vision
The visions of the National Bank are given below:

 To encourage savings in the form of direct investments.

 Be one of the best banks in Bangladesh.
 To contribute in the socio economic development of Bangladesh.
 To establish relationship banking and improve service quality through development of
strategic marketing plan.
 To ensure optimum utilization of all available resources

2.4 Mission
Establishing banking through the introduction of welfare oriented banking system and also ensuring
equity and justice in the field of all economic activities, achieving balanced growth and equitable
development through diversified investment operations, particularly in the priority sectors and
development areas of the country; encouraging socio economic uplift and financial services to the lower
income communities, particularly in the rural areas.

17
2.5 Goal of the Bank
 To become the leading profitable bank.
 Long term goal: To maximize the wealth of the shareholders.
 Short term goal: To earn satisfactory rate of return on investment by providing wide range ofbanking
service.

2.6 Management Style

For any financial and non-financial organization, Management is the most valuable and important
resource of any kind of organization. And a well organization management provides the organization to
reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling of all
financial or non-financial resources of the organization. Different aspect of management practice in
National Bank planning, organizing, staffing, directing, and controlling, human resource practices and
recruitment finally.

2.7 Products and Services of NBL

2.7.1. Deposits Product

 Saving Deposit
 Current Deposit
 Term Deposit
 Foreign Currency Deposit
 Monthly Saving Scheme
 Monthly Income Scheme
 Double Benefit Scheme
 Millionaire Income Scheme

2.7.2 Credit Products

 Overdraft
 Lease Financing
 House Building
 Small Medium Enterprise
 Consumer Credit Scheme
 Trade Finance

18
2.7.3 Cards Products
 Credit Card
 Debit Card
 Visa Card
 ATM Card

2.8 Organizational Strategies

The key tactic of NBL is the organic growth – to form divisions and reinforce their distribution web. The
bank tends to carry on investing and enlarging in Bangladesh as soon as local regulations permit. The
primal strategies are:
 Individuals: appeal, retain and reward best employees.
 Gainful Progress: Increasing sales revenues.
 Implementation: Executing with expertise and speed.
 Quality of Advances: Upholding credit-quality and comprehend the role in managing losses.
 Clientele-Based: Continuously promising and implementing extraordinary clientele facilities.
 Ownership
 Efficiency: Sinking the expenditures and sensible usage of resources.

2.9 Objectives of NBL

The aims of National Bank are stated below:
 Providing swift and enhanced clientele services via application of modern IT.
 Enhanced bank-clientele affiliation.
 Guaranteeing utmost possible dividend to the esteemed stockholders by making greatest usage
of their equity.
 Enforcing the policy of fostering stable development of the bank in all divisions.
 Consolidating the position in the competitive market by announcing innovativeservices.
 Guaranteeing uppermost professional brilliance for the personnel viaheightening of their
productivity, discipline and technical knowledge
 Intensifying the bank’s possibilities of investment by participating in big loan-financing.
 Increase in finances to small/medium enterprises.
 Preserving the reputation of the bank locally and internationally by pushing dynamic and time-
 Saving banking events.

2.10 Management Structure of NBL.

19
During 2001, National Bank Limited made excellent progress in all business sectors for instance, stakes,
credit, support administration, venture, remote settlement, Visa and international trade related business.
The firm has extended authoritative capacities as holding previously and parallel by expanding its venture
exercises. The administration systems are as per the following

20
2.11About National bank Limited, Gopalganj Branch
2.11.1 Branch management Organogram

Md. Abdul Hannan

PO & Manager

Md. AlaUddin
FEO & Floor In charge

General Banking Advance

Cash Clearing Deposit Accounts Advance

&Remittance i) Md.Dedarul i) Md. Dedarul i) Md. AlaUddin,
i) Mr. i) Md. Islam, JO(Gen) Islam, JO(Gen) FEO
DipalMallick, HachiburRahm ii)
FEO an, JO (Gen) ImtiazHossain,FEO
ii) Bayzid
Khan, TA

2.11.2 Highlight of the branch

01 Date of opening of the branch 11.11.2013

02 Name and Period of Present In-charge Mr. Md. Abdul Hannan,PO

From 20.02.2017 to till present
03 Name & period of present 2nd man Mr. Md. AlaUddin, FEO
04 ImtiazHossain First Executive Officer
05 Mr. DipalMallick First Executive Officer(Cash)
06 Md. Dedarul Islam Junior Officer General
07 Mr. HachiburRahman Junior Officer General
08 Mr. Bayezid Khan Trainee Assistant( Cash)
09 Md. Sekender Ali Howlader Security Guard
10 Md. AshrafulAlam Security Guard
11 Md. DelowarHossain Security Guard
12 Md. Zahidul Islam Peon
13 Md. Ashraful Islam Peon

21
Chapter Three
Credit

22
3.1 Definition of Credit
The word ‘credit’ derives from the Latin word ‘credere’ 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 be defined
broadly or narrowly.
Broadly, credit is finance made available by one party (lender, seller) to another party (borrower, buyer).
Narrowly, credit is simply the opposite of debt. Debt is the obligation to make future payments. Credit is
the claim to receive these payments.

3.2 Importance of Bank Credit

Financial intermediary is an important activity in the economy because it allows fund to be channeled
from who might otherwise not put them to productive use to those who will. In this way financial
intermediaries can help to promote a more efficient and dynamic economy. Some other importance of
bank credit is as follows -
1. Credit is an important determinant of money creation and hence of production, consumption
and national income.
2. Credit influences and is influenced by quantity of money, level of economic activity (GNP),
imports and net foreign assets.
3. Credit influences imports and capital movements and hence the outcome of balance of
payments.
4. Credit influences behavior of economic sectors (industry, agriculture) and behavior of
economic agents.
5. Credit provides vital linkage among govt. sector, private sector, financial sector and foreign
sector.
6. Credit is the most important activity of banks because interest of loans constitutes the major
part of bank income.
3.3 Loan Management System of NBL
NBL is a commercial and private ltd bank. The key duty of such bank is to accumulate deposit for a
comparatively lower initiated A/C balance and to provide loans for a comparatively high initiated A/C
balance. A bank has to endure deposit costs and gain earnings from permitting loans. If it is unsuccessful
to endure these expenditures by it is earnings from allowing loan, the business will be shut down. In my
internship program, an acute enquiry of credit disbursement in represented in this part of the research.

3.4 Credit Principles of NBL

To accomplish aim for make the most of the shareholders’ value and protect the interest of the depositors
as well as grow the distinction of the bank’s assets. NBL trails credit ideologies:
 Valuation of the clientele’s nature, loyalty, willfulness to pay back will shape foundation for
loans.
 Clienteles having capability and competence to repay shall only be given a loan.
 Chances of default will be sorted out prior to the loan agreement.
 Credit will be prolonged in the areas where risks of which can be properly recognized and
administered.
 Independent Credit participation in the credit procedure shall be assured.
 Virtuous behavior in all credit operations shall be ensured.
 Be dynamic in recognizing, handling and communicating credit risk.
 Risk and reward to be polished and perfected.

23
  Diverse credit portfolio to be built and support.
 All the credit extensions must accede with the obligation of banking companies’ Act 1991
and amendments thereof periodically.
3.5 Loan Facility Parameters of NBL
NBL prolongs credit for different sincere reasons.
 Nature of Loans
 Purpose
 Limit/Amount of Facility/Maximum Size
 Margin/Equity
 Initiated
 Rate of commission and charges
 Mode of repayment
 Mode of Disbursement
 Security
 Validity/Maximum Tenor
 General/Special Conditions/Covenants
3.6 Loan Repayments and Amortization of NBL
Repayment of advances and what's more gathered interest will be prepared by approach routinely
planned repayments that shall begin from the succeeding month of the installment of development. Prior
installment of development, the client base will store crossed check fulfilling the overall amount of
consistently booked installments solid of Bank, which ought to be accessible for social event on the due
date. Part will be pay inside banks 'gave length of day of reliably. Notwithstanding, forestallment is
moreover permitted.
3.6.1 Loan Amortization
National Bank uses the most typical process of loan amortization, “Capital Recovery Method”. In this
procedure constant monthly compensation is calculated on an actual loan figure at fixed interest for a
given policies time.
Example:
 Loan Amount: BDT 1 lakh
 Rate of Interest: 15%
 Number of Monthly-Installments: 24
3.7 Numerical judgments: Borrower Selection
Under the CCS, the bank is taking care of straightforwardly with numerous borrowers at once, is giving
unbound credit to the, and smear some statistical assessment to choose a specific borrower for unbound
advance dispensing. In this respects, NBL utilizes statistical credit scoring model.
Along this model, the potential borrower is solicited a set from inquiries toward the start of preparing of
credit proposition. The appropriate responses are then scored in view of the principles esteem beforehand
set to score a credit application. In light of the score, a credit proposition is expressed to progress further
or not. The model is as per the following:
Diverse category of scores is secured and a limit of loan is to be decided grounded upon the scores.
Different classes are shown below where total scoring is generatedgrounded uponaccumulatedfigure of
100.

24
 SL Range of Scores Limit of credit Offered (BDT)
1 35 to 37 20000 to 25000
2 38 to 40 25000 to 30000
3 41 to 43 30000 to 40000
4 44 to 46 40000 to 50000
5 47 to 50 50000 to 70000
6 51 to 54 70000 to 80000
7 55 to 58 80000 to 90000
8 59 to 61 90000 to 100000
9 62 to 65 100000 to 150000
10 65 to 70 150000 to 200000
11 More than 70 200000 to 300000
Table 4: The limit of loan grounded upon scores

3.8 Credit Screening Procedure

To minimalize the credit losses, checking procedures and framework ought to be fortified and more
compelling outline is supposed to be produced in retrospect of changed complications concomitant with
different kinds of credit. The strategies and agenda must show early sign of decaying money related
strong suit of a borrower. At the very least, covers the accompanying to be created and given to
administration educate the branch to legalize the same.
 Overdue principle & interest
 Overdue trade bills
 Status reports on drawing power and collateral shortfall on a regular basis.
 Breach of loan covenants/ policies and conditions/documentations deficiencies.
 No payment and late payment
 Branch monitors OD/cc facilities on a regular basis to ensure turn over.
 Non-receipt of financial statements within time.
 Details of Early Alert A/Cs and preparation of list of delinquent A/C and Special Mention
A/C
 Identification of early alert A/C, delinquent A/C Special Mentioned A/C.

25
3.9 Credit (Loan & Advance) Approval Procedure
NBL demeanors its banking acts underneath the branch banking method. Credit proposals are commonly

initiated at branch. Nevertheless it may also be expected at Head Office for syndication and from big
clienteles, Financial Institutions.
At the basic level, the credit representatives/executives including Branch Manager guarantee adequacy
and consistency of the records in the wake of getting credit applications. They will start credit
recommendations, get ready point by point credit notice subsequent to undertaking a careful credit
check. Branch credit advisory group after altogether and basically looking at the proposition will
prescribe to Branch Manager. At the point when the proposition falls past the intensity of the Branch
supervisor then it will sent to Regional Manager. At the point when the proposition falls past Regional

26
Manager's capacity then it sent to Head Office Credit Division. Divisional Head, Credit will get credit
and hazard surveyed by credit authorities. The proposition being discovered worthy will be put to Head
Office credit board if the proposition falls under designated expert of the administration.

3.10 Securities Accepted against Loan by NBL

3.10.1 Security against Loan

NBL for the most part depends/will keep on relying on security based loaning, mulling over the character
of the borrower ,idea of the business income, ecological, financial, business and other impacting factors.
In acquiring security essential and insurance security are recommended.

3.10.2 Securities & Provision

The following securities are established:
 Machineries of factory/industry on hypothecation policies.
 Raw materials, work in progress, finished goods, stock in trade on hypothecation and pledge
basis.
 Land and building value under registered mortgage.
 Cars, buses, water crafts, vessels under hypothecation and joint registration.
 Shipping official papers as lien against LC.
 Trust receipt
 Export official papers-under Lien
 Export LC Contract under lien.
 Packing credit letter
 Personal guarantee/corporate guarantee/cross-corporate guarantee.
 Postdated cheques and etcetera

3.10.3 Categories of loan

NBL categorized all loans 4 groups as follows:
 Continuous Loan: The credit A/Cs in which interchange are to be created through a certain
point of internment that requires an expiration date for full alteration would be handled with as
ceaseless advance. For e.g. cash credit, overdrafts, and etcetera. If clientele wishes to take an
advance against their FDR or other accounts, they have to deliver all official papers of FDR.
They may also take loan counter to their fixed assets.
 Demand Loan: This advance ends up repayable on request by the bank. If any provisional or any
other liabilities are revolved to force loans they may also be considered as Demand Loans. Such
are: Forced LIM, PAD, FBP, and IBP etcetera On the off chance that client needs to take advance
against their home, at first bank need to see all deeds and archives legitimate or not, at that point
take the valuation of advantages and give credit 80% of significant worth.
 Fixed Term Loan: Loans repayable within particular policies within particular repayment
timetable thus shall be considered as Fixed Term Loans.
 Short Term Agricultural & Micro Credit: comprises the short-term advances registered under
the Annual Credit program issued by the Agricultural Credit department of Bangladesh Bank.
Credit in the agronomic sector repayable within less than 365 days shall also be included.

27
3.11 Types of Credit

Credit

Loans Overdrafts Cash Credits Discounts

Loan General SOD (FO) Pledge Inland Bills

Purchase
House Building SOD (G) Hypothecation
Loan FDBP &
Discounted
Loan against
Import
Payment
Merchandise
against
(LIM)
Document

Loan against
LDBP
Trust Receipt
(LTR)

Loan against
Packing Credit
(LPC)

Transport Loan

Project Loan

Demand Loan

Consumer
Finance

Lease Finance

SME Loan

House
Renovation
Loan

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 1. Cash Credit (Hypo):
Cash Credit edge ceaseless energizes and traits beyond what many would consider possible and
have and lapse by date. An admin expense that affects an interest cost is typically made as a level
of the estimation of purchases. These credits may be of promised or potentially hypothecated and
banks should report these in autonomous heads joined under the authority head cash credit. An
ordered clarification of hypothecation is given underneath. The letter of hypothecation makes a
charge against the items for the Bank anyway neither the ownership nor its possession is passed
on to it; only a benefit or energy for the stock is made for the Bank and the borrower binds
himself to give responsibility for items to the bank when called upon to do in that capacity.
Exactly when the possession is given over, the charge is changed over into guarantees.
2. Cash Credit (Pledge)
Underneath this preparation a cash credit is approved against guarantee of items or rough
materials. Through denoting the letter of guarantee, the borrower surrenders the physical
responsibility for stock under the Banks great control as security for portion of Bank
commitment. The obligation regarding stock, regardless, remains with the borrower. The
guarantee makes a surmised lien for the Bank on the central stock. If there should arise an
occurrence of disillusionment of the borrower to regard his obligation the Bank can offer the
stock for recovery of the advancement. No assurance security is routinely asked for permit of
such credit.
3. Loan against Trust Receipt (LTR)
The loan competence up to a reasonable boundary to the clienteles by a Bank against security of
the value of trade-in merchandise. This also comprises loan against Trust Receipts.
4. Term Loan:
A Bank advance for particular time-policies paid off with interests in permanent timetables. The
term loans are:
 Short Term: Up to and containing 365 days.
 Medium Term: In excess of an annual and up to containing sixty months.
 Long Term: In excess of sixty months, including financing of lease.
5. Overdrafts:
A credit office on a clientele base's current A/C at a Bank approvingthem to overspend up to a
particular constrain for a concurred day. The policies of the credit are ordinarily that it is
repayable on request or at the lapse date of the understanding. NBL provides overdraft office for
commercial demographics for everyday professional tasks.

Benefits:
 Low costs in overdraft A/C upkeep.
 Facility is accessible against deposit receipt or mortgage property.
 Low Rate of Interest 13 to 16%.
A/C Creation
 Introductory current A/C.
 Others necessary official papers as per loan requirement.

1. Lease Finance:
A verbal/on paper contract conveying the right to private use and proprietorship of assets for
a certaintime-duration.NBL provides leasing facility for clienteles with laidback installment
facility.

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Financing Area:

 Capital machinery.
 Diverse equipment.
 Gas, Diesel generator and Power plant.
 Medical equipment.
 Lift or elevator.
 Information technology equipment.
 Construction equipment.
 Consumer durables.
Benefits:
 Competitive monthly rental.
 Tax benefit.
 Fast processing.
 Easy handover after leasing time-duration
2. Home Loan:
Benefits:
 Financing figure ranges to 70% or BDT 7500000 which is maximumof overall
construction expenditure.
 Grace time-duration offered up to nine months in flat acquisition or twelve months in
building.
 Competitive Rate of Interest.
 No application/ processing charges.
Eligibility: Any resident of Bangladesh who is competent of repayment, can apply for this loan.

3. SME Loan:
When businesses need capital and small companies are not familiar to this,an alternative they
possess is to elevate these is small loans assisted by SBA. The capital requirements begin
from the concept stage itself. NBL provides financial support to small
businessmen/enterprise with new items named "Festival Small Business Loan" and "NBL
Small Business Loan" has been introduced in the Bank.
4. Consumer Credit
Any advance or credit extension that a borrower uses to buy items and enterprises at the
retail level. Regularly, purchaser credit funds any benefit that devalues rapidly and isn't
utilized for speculation purposes. MasterCard are a typical case of buyer credit since one
pays for conventional costs, for example, basic supplies or fuel with a Visa; one normally
would not buy stock with a MasterCard. Advances for training and autos are likewise cases
of clientele credit. Be that as it may, clientele credit explicitly avoids advances for land. NBL
provides buyer credit office for retail clients.
5. Financing Items:
 Electronics consumer items.
 or Computer accessories
Benefits:
 Fast processing.
 Competitive Rate of Interest.
 No application or processing fee.
 Easy monthly installment.

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  Hospitalization loan: For treatment in hospital
 Industry-wise Loan Disbursement of NBL

3.12 Interest Rate of Various Credits Offered by NBL

Types of Loanand Advance Existing Rate Mid-Rate on

ofInterest Lending
Cash Credit:
i. Pledge 13% 13%
ii. Hypothecation 13% 13%
Working Capital 12-18% 12%
SOD (F) General:
i. Against FDR/FO of our Bank 2-4% above relative 3% Above relative
FDR rate FDR rate

ii. Against FDR/FO of other Bank’s ICB 12-13% 13%

Units 12-13% 13%
iii. Against Work/Supply Order, Real
Estate etc.
Loan (Term Loan):
i. Small Cottage Industry 12-17% 17%
ii. Large and Medium Scale Industry 12-17% 17%
iii. Agricultural subject to BD (Bank 10% 13%
Norms) 13% 13%
iv. HBL 12-15% 13%
v. Transport, Project Loan/Demand At Bank Rate At Bank rate
Loan At Bank rate At Bank Rate
vi. Staff HBL At Bank rate At Bank rate
vii. Executive Car Loan
viii. Staff Provident Fund
Small Loans:
i. Small Business Loan 17% 17%
ii. Festival Loan 17% 17%
iii. House Repairing/Renovation Loan 17% 17%
iv. Personal Loan 17% 17%
v. Consumer Finance Scheme 17% 17%
vi. Education Loan 13% 13%
Lease Finance 17% 17%
Import Finance:
i. PDA 12%-15% 13%
ii. LIM 12%-15% 13%
iii. LTR 12%-15% 13%
Export:
i. Packing Credit ECC 7% 7%
IBP (Inland Bill Purchase) 12%-15%(for overdue 13%(for overdue
FBP (Foreign Bill Purchase) period) period)

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 FDBP &Bill Discount 12%-15%(for overdue 13%(for overdue
period) period)
All other Commercial Lending 13%-15% 13%

3.13 Definition of Loan/Credit Policy

A bank has social obligation of meeting diverse credit needs of different sections of the community but it
cannot afford to lend the funds of its depositors and owners indiscriminately and incur losses. It has to
conduct its lending business in an orderly and safe manner so that its loan portfolio remains balanced
from the standpoints of size, type, maturity and security and promises reasonable and steady earnings.
This calls for a clear-cut and security and creditworthiness, liquidation of loans, compensation balances,
limits of lending authority, loan territory and similar other matters. Such a policy provides a direction to
the use of funds; controls the size; make up loan portfolio and influences credit division of the bank.
With systematic loan policy banker will find it easy to reach the goal of the banks and serve the public
concurrently.
So in a short we can say, a loan policy is a guideline of a financial institution to determine-
 Who shall get credit (eligibility to get loan)?
 How much to lend (amount of lending)?
 Why to lend (purpose of lending)?
 Where to finance (portfolio management depending upon profitability and requirements for
participation on socio-economic benefits)?
3.13.1 Credit Operations
Credit operations start from the selection of borrower from field level i.e. branch initially ends with
disbursing sanctioned amount after proper documentations as per given authorization of the bank.

3.13.2 Applicant Borrower

Filled up prescribed application form submitting required papers
3.13.3 Advance Department of Branch/Branch Manager
Scrutinizing submitted papers/documents, preparing CIB inquiry forms, LRA report and preparing
proposal for onward submission to Head Office’s approval.
3.13.4 Credit Division
Scrutinizing the proposal submitted by branch, query made if required, appraising the credit proposal for
onward submission to higher authority, inform the branch after getting decision of the sanctioning
authority.

3.14 Factors Influencing Loan/Credit Policy

 Capital position.
 Earnings requirements.
 Deposit variability.
 State of local and national economy.
 Ability and experience of loan officers.
 Competitive position.
 Credit need of the area served.

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3.15 Sources of Credit Information
1. Loan application.
2. Market reports.
3. Study of accounts.
4. Financial statements.
5. Personal interview.
3.16 Important Points for Selecting Good Borrower
National Bank Ltd. considers the following points while selecting a good borrower-

1. Sound Entrepreneur:
 Integrity
 Self-confidence
 Dynamic
2. Sound Management:
 Integrity
 Endurance
 Co-operation
3. Sound Market:
 Depth
 Growth
 Stability
4. Sound Product:
 Quality
 Demand
 Durability
5. Sound Operation:
 Utilities
 Raw materials
 Transport

6. Sound Finance:
 Fund
 Collateral
 Capital market
7. Other Information:
 Reputation
 CIB Report
 Past Performance
 Demand Gap
 Analysis of Balance Sheet

3.17 Credit Analysis

Credit analysis is the analysis of financial statements of business/customers for the purpose of lending.
Credit analysis are conducted to determine whether the customer is creditworthy and whether the
customer has sufficient cash flows and back up assets to repay the loan. The main purpose of credit

33
analysis is to ascertain whether the loan can be serviced by the customer and whether the bank is
adequately protected to realize the loan in the event of default by the borrower to repay the loan.

3.17.1 Major Issues/Questions Analyzed/Examined in Credit Analysis

a) Is the borrower creditworthy?
b) Whether the purpose of the loan is consistent with bank’s credit policy and
government regulations.
c) Whether customers or his business have the ability to generate enough cash to repay
the loan.
d) Whether sufficient security has been offered so that in the event of default bank’s
fund can be recovered. Whether bank’s claim on that security can be established
without risk/with low risk.
e) Fixing the amount of loan, loan terms and conditions, documentation, etc. to meet the
needs of the borrower and to protect the interest of the bank.
Is the Borrower Creditworthy?
a. Character:
 To determine whether the borrower has a responsible attitude towards borrowed funds and
whether he will have every effort to repay the loan.
 Responsibility, truthfulness, serious purpose and serious intention to repay loans make up the
characters of borrower.
b. Capacity:
 Customer requesting the loan has the authority to request a loan and have the legal standing to
sign loan agreement and documents.
c. Conditions:
 Whether borrower has sufficient assets to repay the loan (cash, business assets, other
moveable/immoveable properties).
 Other loans and liabilities of the borrower.
d. Credit History/Credit Habit:
 Whether loans borrowed by the customers previously and how those earlier loans were handled.
 Whether there is any loan default earlier.
 Whether legal action has ever been taken against him for recovery of default loan.
e. Credit Ratings:
 Credit ratings of the borrower by CIB of Bangladesh Bank.

3.17.2 Purpose of the Loan

 Customers must have the well-defined purpose for requesting the loan.
 Purpose of the loan must be consistent with bank’s credit policy and government regulations.

Business Position:
a. Cash flow: There are three sources to repay the loan-
1. Cash flow generated from sales or income.
2. The sale or liquidation of assets.
3. Funds raised by issuing debt or equity securities.
History of earnings and sales whether there is a history of steady growth in earning or sales and whether
there is high profitability that such growth will continue.

34
b. Conditions: Analysis of recent trends in the borrower’s business/industry and whether changing
economic condition might affect business or loan.
c. Control: Whether there is a chance of change in government policy or law could adversely affect
borrower’s business.

3.18 Security for Loans and Advances

There are securities for loans and advances which are as follows-
a) Most preferred business’s income or cash flow from which the customers will repay the loan.
b) Second security consists of customer’s balance sheet/his assets that can be liquidated for
adjustment of loan.
c) Guarantees from owners or from a third party.
 Primary security=goods, hypothecated/pledge
 Secondary security=mortgage of real estates
d) Insurance policy as per security.
e) Collateral security serves two purposes for a lender, first if the borrower cannot pay, the
collateral gives the lender the right to seize or sell those properties to cover the amount of
loan default. Secondly, collateral security gives the lender a psychological advantage over the
borrower. Borrowers in this situation feel more obligated and work hard to repay the loan to
avoid losing valuable assets.
3.19 Loan amount/Loan terms and conditions/Loan documents
1. Loan amount should be fixed such a way that it will require the needs of the customer or his
business. Proper accommodation of a customer may involve lending more or less money than
asked for over a longer or shorter period than requested.
2. Loan terms and conditions should be termed in such a way that they will protect bank’s interest
as well as customer’s purpose. The loan agreement must be structured in such a way that the
borrower may be able to service the loan and be able to comfortable repay the loan as per
schedule.
3. Loan documents must be executed properly so that the bank can establish its claim against the
assets or earnings of the customer to recover the bank’s funds rapidly at low cost and with low
risk in the event of default by the borrower.
4. If necessary, certain restrictions (covenants) may imposed on the borrower in loan agreement so
that the borrower may not include to such activities which could threaten the use and recovery of
bank’s funds.

3.20 Procedure of Making Loan

The following procedure is applicable for giving advance to the customer. These ares-
 Duly fill up first information sheet
 Application for loan
 Collecting CIB report from Bangladesh Bank
 Feasibility study
 Making loan proposal
 Project appraisal
 Head Office approval & sanction letter
 Disbursement of loan & charge document
 Repayment, defaultation& classification of loan

35
  Bad loan monitoring and recovery system
3.21 Information Sheet
Information sheet is prescribed form provided by the respective branch that contains NBL bank
information of the borrower like-
 Name of the concern with its factory location
 Officer’s address and telephone number
 Name of the main sponsors with their educational qualification
 Business experience of sponsors
 Details of past and present business, its achievement and failures
 Income tax registration number with the amount of tax paid for the last three years
 Details of encumbered assets personally owned by the sponsors
 Estimated cost of the project & means of finance, etc.
 Here a bank officer needs to select a potential borrower that involves the study of borrower.
Borrower selection includes the study of 6cs-
1. Character
2. Capacity
3. Cash
4. Collateral
5. Condition
6. Control
All must be satisfactory for the loan to be a good one from the lender’s point of view.

3.21.1 Application for Loan

After receiving the first information sheet from the borrower, bank official verifies all the information
carefully. He also checks the account maintained by the borrower with the bank. If the official becomes
satisfied then he gives loan application form to the prospective borrower.

3.21.2 Collecting CIB Report from Bangladesh Bank

After receiving the application for advance, National Bank Ltd. sends a letter to Bangladesh Bank for
obtaining a report from there. This report is called CIB (Credit Information Bureau) report. NBL
generally seeks this report from the head office for all kinds of loan. The purpose of this report is to be
informed that whether the borrower has taken loan from any other bank, if ‘yes’ then whether the party
has any overdue amount or not. Internal sources i.e. to find out account performance, reputation, track
record repayment capability and intention to pay back the bank’s money.
3.21.3 Feasibility Study
After receiving the CIB report from the Bangladesh Bank the bank conducts a feasibility study.
Following aspects are mainly noticed-
a) Legal Aspects:
 Registration Certificate
 Trade License
 TIN Certificate
 Vat Registration Certificate
 Memorandum of Association & Articles of Association
 CIB Report, etc.
b) Business Aspects:
 Application for proposed loan
 Information in a prescribed format for loan/credit limit

36
  Audited balance sheet
 List of machineries/Stock report
 Details of assets, etc.
c) Security/Documentation:
 Original deeds of the property to be mortgaged
 Bio deeds
 Net worth of the applicant
 Lending risk analysis
3.21.4 Making Loan Proposal
After conducting feasibility study, the branch prepares a loan proposal which contains terms and
conditions of loan for approval of Head Office or Head of the concerned branch. The following are
necessary for sending the loan proposal-
1) Loan application
2) Declaration of the borrower
3) Bio data of the borrower with photograph duly attested
4) Purpose and limit of loan
5) Credit report
6) Legal opinion
7) Trade license
8) Copy of title deeds
9) Tax clearance certificate, etc.
10) If the bank officer thinks that the project is feasible then he will prepare a proposal on behalf
of the borrower. NBL prepares the proposal in a specific form called loan proposal. It
contains following relevant information-
11) Date of establishment, constitution
12) Main sponsor/director with background
13) Capital structure, address
14) Account opening date introduction by type of business, particulars of previous sanctions
15) Security (existing and proposed)
16) Movement of accounts
17) Components on the conduct of the account
18) Details of deposit, liabilities of allied concerns, liabilities with other banks
19) CIB report

20) Rated capacity of the project (item wise)

21) Production or purchase during the period
22) Sales during the period
23) Earning received for the period
3.21.5 Project Appraisal
It is the pre loan analysis done by the officer before approval of the project. Project appraisal in the
banking sector is needed for the following reasons-
 To justify the soundness of an loan
 To ensure repayment of bank finance
 To achieve organizational goals
 To recommend if the project is not designed properly

37
3.22 Techniques of Project Appraisal
An appraisal is a systematic exercise to establish that the proposed project is a viable preposition.
Appraising officer checks the various details submitted by the promoter in first information sheet,
application for loan and loan proposal. National Bank Ltd. considers the following aspects in appraising
a proposal-
 Technical viability
 Commercial viability
 Financial viability
 Economic viability
The Head Office (HO) mainly checks the technical, commercial and financial viability of the project. For
others HO is dependent on branch’s information. But when the loan size is big then the HO verifies the
authenticity of information physically.

3.23 Head Office Approval & Sanction Letter

3.23.1 Head Office Approval
Upon receipt of the loan proposal from the branch, the Head Office again appraises the project. If it
seems to be a viable one then HO sends it to the Board of Directors for the approval of the loan. The
Board of Directors considers the proposal and takes decision whether to approve the loan or not. If the
Board of Directors approves the loan, the HO sends the approval to the concerned branch with some
conditions. These are like-
 Drawing will not exceed the amount of bill receivables
 Branch will not exceed the sanctioned limit
 All other terms and conditions
 Bank may change or alter or cancel any clause (s) of the sanction without assigning any reason
whatever and that will be binding upon the client unconditionally
 Required charge documents with duly stamped should be obtained
 Drawing will be allowed only after completion of mortgage formalities and other security
arrangement, etc.

3.23.2 Sanction Letter

After getting the approval of the HO, the branch issues a letter to a borrower. A sanction letter contains
the following particulars along with other details-
 Name of the borrower
 Facility allowed
 Purpose
 Rate of interest
 Period of loan and mode of adjustment
 Security
 Other terms and conditions

3.24 Disbursement of Loan and Charge Documents

After issuing the sanction advice and if the borrower accepts the sanction letter, the disbursement starts.
Then the bank will collect necessary charge documents which vary on the basis of types of facility, types
of collateral. It includes 3 steps-

38
3.24.1 Charge Documentation: Documentation is a written statement of the fact evidencing certain
transactions covering the legal aspects duly signed by the authorized persons having the legal status.
Following are the most common documents used by the NBL for sanctioning different kinds of
investment-
 Joint promissory note
 Letter of arrangement
 Letter of disbursement
 Letter of installment
 Letter of continuity
 Trust receipt
 Counter guarantee
 Stock report
 Letter of lien
 Status report
 Letter of Hypothecation
 Letter of guarantee
 Documents relating to mortgage
3.24.2 Charges on Securities: Charge documentation also includes creation of charges on securities.
Charges on securities mean a documented claim on securities by means of which it may be made
available as a cover for an advance. There are 6 types of modes of charging securities-
 Pledge: Pledge is the bailment of goods as security for payment of a debt or performance of a
promise, a pledge may be in respect of goods including stocks and share as well as documents of
title to be good such as railway, bill of lending, etc. duly endorsed in bank’s favor.
 Hypothecation: Hypothecation is the possession and ownership of the goods both rest with the
borrower. The banker creates equitable charges on securities to the borrower.
 Mortgage: In this case the mortgagor does not transfer the ownership of the specific immovable
property to the mortgage only transfer some of his rights as an owner. The banker exercises the
equitable mortgage.
 Lien: Lien is the right of the banker to retain the goods of the borrower until the loan is repaid.
A banker can retain all securities in his possession till all claims against the concerned person are
satisfied.
 Assignment: Assignment means transfer of any existing or future right, property or debt by one
person to another person. Usually assignment is made of actionable claims such as book debts,
insurance claims, etc.
 Set-off: It means the total or partial merging of claim of one person against another in a counter
claim by the letter against the former.

3.24.3 Disbursement of Loan Amount: In practical, the loan amount is disbursed in different ways
which depends on the following things-
 Nature of the loan
 Type of loan
 Nature of the borrower
 Nature of the business
 Period of the loan
 Amount of the loan
 Area of the project
 Return on investment, etc

39
Generally the bank disburses a loan in three ways-
1. Loan amount can be disbursed wholly by crediting the borrower’s loan account.
2. The amount can be disbursed monthly in an equal amount.
3. The bank can disburse the loan amount after the completion of a part of the project or
floor of a building or anything as mentioned in the loan agreement.
The bank can disburse the loan in any of the above ways but it should always be remembered that the
amount must be disbursed within one year from the date of sanction of the loan.

40
 Chapter Four
Cash Credit (Hypothecation)

41
4.1 CC (H)
Cash Credit (hypothecation) is a one type of continuous loan given for day to day operation of business.
This time of loan is given to that business firms who have inventories to pledge. It’s called a working
capital loan. Interest rate will be counted on outstanding balance. It is given to 50 percent of inventories
and that is called 50 percent margin.

4.2 Attributes of CC (H)

Primary Security : Inventories

Secondary Security : Collateral
Support Security : 1. Personal Guarantor
2. Charge documents
3. Corporate Guarantor
4. Check

National Bank Limited, licensed by the Government of Bangladesh as a Scheduled commercial bank in
the private sector, is one of the leading private commercial bank having a spread network of 139
branches across Bangladesh. In view of the above, the Bank within a period of 25 years of its operation
achieved a remarkable success and met up capital adequacy requirement of Bangladesh Bank National
Bank Limited is a customer oriented financial institution. It remains dedicated to meet up with the ever
growing expectations of the customer because at National Bank, customer is always at the center.

4.3 Simple Overview of Cash Credit (hypo) of National Bank Limited, Gopalganj
Branch

Paid up capital 2.15 Billion

Highest loan limit 35 percent of Paid up capital
Interest Rate 15 % to 18 % per annum
Loan Sectors Sector Contribution
Trading Business 60 %
Manufacturing Business 20 %
Shrimp Industry 10%
Others 10%
Demanded Securities Security Objects
Primary Hypothecation of Inventories
Secondary Collateral
Support Personal Guarantee
Credit Worthiness Determined by different Ratios

CIB sending Period 2 Months

CRG Score Requires 75 and Above

42
National Bank Limited has a paid up capital of Tk. 2.15 million.
4.4 CC (H) Loan Limit
Gopalganj Branch of National Bank Ltd. has a highest cash credit (H) loan limit of 35 percent of its paid
up capital in which 15 percent are funded and rest is non-funded. Tk. 10 lac is the highest disbursement
limit from this branch. Up to Tk. 15 lac will be provided from regional branch and more than this will be
provided from head office.

4.5 Sectors of Loan

NBL, Gopalganj Branch gives CC (H) loan to 4 sectors. Intruding sector, working capital loan for whole
sale business and manufacturing firms are given. Traders and Manufacturers include Rice mills, Flour
mills, Chanachur, Dal mills, Food veins, Import food resellers and etc. In Shrimp sector includes Shrimp
Exporters and Commission agent. But, loan for Shrimp Exporting Business is currently not available.

4.6 Security
NBL secures its loan with customer by demanding securities. Primary security that NBL demands
for CC (H) is Hypothecation of inventory.
Main collateral that NBL demands is Required Mortgage of Land and Building. Support security
includes
 check,
 corpora
 Guarantee,
 personal guarantee
 guarantee of spouse of board of director and also
 Charge documents.
4.7 Working Capital Assessment
Working capital is the assets which is required for a unit to complete the accounting cycle of any
manufacturing company or trading business. Assessment of working capital for giving CC (H) loan is
must for a bank. National bank limited requires working capital assessment only for manufacturing firms
for CC (H) loan. The factors that NBL asses for Working Capital -
 Raw materials (importable)
 Raw Materials (Imported but locally procured)
 Work-in-process
 Stock of finished goods
 Stock of spares etc.
 Accounts Receivable
 Other Expenses
4.8 Credit Worthiness
NBL, Gopalganj Branch analyzes financial statement of the customer with different type of ratios and
cash flow. Such as Expense control, operating efficiency, Coverage, Leverage, Profitability, Liquidity
etc. Expense-control ratio that judges the quality of a business firm’s management is how carefully it
monitors and controls its expenses. Operating Efficiency Ratio shows how effectively assets are being
utilized to generate sales and cash flow for the firm and how efficiently sales are converted into cash.
Liquidity Ratio indicates how fast the customer can raise cash. Leverage ratio indicates the amount of
debt a borrower has taken.

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National Bank Limited, Gopalganj Branch sends CIB (Credit Information Bureau) report in every 2
months. It is to be noted that NBL only gives loan to the customer who has a CIB status ofUnclassified
(UC) or Standard (STD). Additionally, the customer has to get a score of75orabove in Credit Risk
Grading (CRG) sheet.

4.9 Now What Includes in CRG?

Credit Risk Grading is a sheet which measures the risk exposure of the bank for lending money. CRG
grading scale is

Number Grading Short Score

1 Superior SUP Fully cash secured, secured by government
guarantee/international bank guarantee
2 Good GD 85+
3 Acceptable ACCPT 75-84
4 Marginal/Watch list MG/WL 65-74
5 Special Mention SM 55-64
6 Substandard SS 45-54
7 Doubtful DF 35-44
8 Bad/Loss BL <35

NBL evaluates Risk exposure with different criteria. CRG is divided into different criteria with different
weightage.

Criteria Ingredients Weight

A. Financial Risk
B. Business/ Industry Risk
C. Management Risk
D. Security Risk
1. Leverage: (15%)
2. Liquidity: (15%)
50%
3. Profitability: (15%)
4. Coverage: (5%)
1. Size of Business
2. Age of Business
3. Business Outlook
18%
4. Industry Growth
5. Market Competition
6. Entry/Exit Barriers
1. Experience
2. Second Line/ Succession 12%
3. Team Work
1. Security Coverage
(Primary)
2.Collateral Coverage 10%
Property Location)

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 3. Support (Guarantee)
E. Relationship Risk 1. Account Conduct
2. Utilization of Limit (actual/
Projection)
10%
3. Compliance of Covenants /
Conditions
4. Personal Deposits
Total 100%

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4.10 Money Lending Procedure of National Bank Limited, Gopalganj
Branch

Several steps of lending procedure-

First, a customer must have a Current account to apply for the loan. If he or she has an account, then he/
she will fill up a loan application form with required documents. Credit officer then evaluate the
documents and go for a primary selection. Evaluation includes Business location visit, sales volume
check, stock review, bank statement etc. If the credit officer finds it acceptable then he/ she goes for
Formal Loan Proposal. But, the customer must have mandatory documents. Main mandatory
requirements for the loan proposal includes

1) Customer Information
2) Owners Information
3) Financials
4) Marketing Prospects
5) Forecasts for next year VI. Relationship with Bank
6) Updated CIB report
7) CIB status with UC/ STD
8) Successors Information
9) Must have a ready Successor XI. Financial Account Statement
10) CRG score of 75 or above
11) Stock Report
12) Credit Worthiness
13) Collateral Securities
14) Support Securities
15) Valid Business License
16) Valid TIN number
17) Good Customer Background
18) Good Credit Rating XXI. Income Source
19) Co-Signer and many more

With all requirements filled with a Prescribed Loan Proposal format, credit officer sends the proposal to
Regional Branch for further scrutiny. Then an office note is made and sent to Credit risk Management
Division. There the proposal will be evaluated by Head of Management, Law and Recovery Department
and Head of CRMD.

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4.11 CRMD of NBL & Practice of NBL

Figure: An overview of CRMD of NBL

If approved by all of these departments then it is send to proper authority with recommendation. Then
documentation is placed to credit administrative department (CAD). If satisfied, CAD will approve the
loan and made a disbursement letter to respective branch with requirements of mandatory documents.
If all documents are submitted and approved, then the customer can disburse the loan.

Branch

Regional
Disbursement
Office

CAD Head Office

Figure: Flow & checking of Loan Proposal

That’s all about a loan application and disbursement procedure of National Bank Limited

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 Chapter Five
Financial Performance of Gopalganj Branch

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5.1 Budget and achievement (Figure in Lac taka)

31.12.2017 31.12.2018 30.06.2019

Particulars
Budget Actual Budget Actual Budget Actual
Profit/loss 50.00 -7.48 50.00 56.24 32.00 34.28
Deposit 4500.00 2731.40 4000.00 4174.70 4820.00 4546.48
Advance 2500.00 1597.84 2000.00 1693.72 1760.00 1787.58
Agri Credit 60.00 16.70 35.00 16.00 35.00 18.00
Recovery 83.00 0.31 11.39 2.90 118.28 1.00

5.2 Profitability, Performance and Growth analysis

Sl. Particulars 31.12.2017 31.12.2018 30.06.2019

01 Yield on Advance = 12.26 % 13.57 % 13.58 %
02 Cost of fund = 5.97 % 6.50 % 6.92 %
03 Interest spread (1-2) = 6.29 % 7.07 % 6.66 %
04 Cost of Fund with establishment cost = 10.63 % 9.80 % 9.52 %
05 Term deposit to Total Deposit = 57.44 % 68.36 % 69.62 %
06 Non-investment income to total income = 4.08 % 3.21 % 5.22 %
07 Employee expenditure = 0.25 :1 0.19 :1 .018 :1
08 Per employee deposit = 210.10 321.13 349.72
09 Per employee Advance = 122.91 130.28 137.50
10 Per employee profit/loss = -0.57 4.33 2.63

5.3 Financial Information (Figure in Lac Taka)

Sl. Particulars 31.12.2017 31.12.2018 30.06.2019
1 Interest received from loan and advance 170.88 216.79 112.64
2 Interest received from IBTA 63.51 170.11 114.60
3 Total Interest received (1+2) 234.39 386.90 227.23
4 Interest paid on deposit 141.38 227.55 144.70
5 Interest paid on IBTA - - -
6 Total interest paid (4+5) 141.38 277.55 144.70
7 Net interest Income(3-6) 93.01 159.35 -82.53
8 Non-interest income 9.89 12.84 6.10
9 Operating income (7+8) 102.90 172.19 88.63
10 Operating expenses 110.38 115.95 54.35
11 Total Income(3+8) 244.28 399.74 233.33
12 Total expenditure (6+10) 151.76 343.50 199.05
13 Profit/loss (11-12) -7.48 56.24 34.28
14 Employee expenditure 63.23 65.43 36.36
15 Average advance 1393.45 1596.90 1658.06
16 Average deposit 2367.45 3504.63 4181.61
17 Average high cost deposit 1383.43 2629.62 3045.82
18 Number of average voucher 390 440 460
19 Number of employee 13 13 13

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5.4 Position of loan and advance with analysis as on 03.07.2019
Sl. Particulars Amount ( In lac)
1 Total deposit 4484.04
2 Loan and advance
a) regular/ standard 784.28
b)overdue 852.68
c) Special mentioned account
d) Classified 118.28
Total advance (a+b+c+d) 1755.24
3 Interest suspense amount 10.18
Analysis of loan and advance
i) overdue advance to total advance 48.58 %
ii) total classified advance to total advance 6.74 %
iii) Total advance to total deposit 39.14 %

5.5 Breakup of classified advance as on 31.12.2018

Sl. Classified Advance Total
Head of A/C SS DF BL
No Amount No Amount No Amount No Amount
1 CC(H) 1 20.01 1 82.82 2 102.83
2 Dariddro Mukti 3 2.07 3 2.07
3 Agri 5 6.49 5 6.49

5.6 Breakup of classified advance as on 30.06.2019

Sl. Classified Advance Total
Head of A/C SS DF BL
No Amount No Amount No Amount No Amount
1 CC(H) 2 103.39 2 103.39
2 Dariddro Mukti 2 1.57 2 1.57
3 Agri 5 6.76 5 6.76
4 SOD (BB) 1 6.57 1 6.57

8.7 Recovery Position against classified advance

Classified amount Rescheduled amount
Year
Outstanding Recovered % Outstanding Recovered %
2018 111.39 2.90 2.60%
31.12.2017 87.52 0.31 0.35%
31.12.2016 Nill
31.12.2015

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 8.8 Year wise deposit Mix of the branch
31.12.2017 31.12.2018 30.06.2019
% of
Particulars of Deposit % of total Amount( Amount( % of total
Amount( Lac) total
deposit Lac) Lac) deposit
deposit
Current deposit 181.03 6.85 274.24 6.57 96.36 2.15
Saving deposit 736.53 27.86 858.77 20.57 951.40 21.22
Fixed deposit 375.60 14.21 846.15 20.27 1060.40 23.65
SND 119.60 4.52 86.52 2.07 97.99 2.19
NMS 624.41 23.62 871.78 20.88 940.45 20.97
MDS 136.87 5.18 183.78 4.40 179.36 4.00
MES 20.00 0.76 117.21 2.81 116.53 2.60
DBA 282.13 10.67 668.34 16.01 697.70 15.56
SBD 0.60 0.02 1.26 0.03 1.50 0.03
DBS 79.33 3.00 97.63 2.34 97.63 2.17
Sadhinota 68.0 1.63 99.50 2.22
Other deposit 87.14 3.30 101.02 2.42 145.17 3.24
Total 2643.24 100.00 4174.70 100.00 4484.04 100.00

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 Chapter Six
Recommendation and Conclusion

52
6.1 Recommendations
National Bank Limited is a second generation private commercial bank in the country with
commendable operating performance. Some recommendations regarding bank’s betterment are
described below. The recommendations given below are not decisions; rather they are only
suggestions to improve the performance in order to fulfill the customer satisfaction so that clients give
more preference to National Bank Limited. The recommendations are made on the basis of findings
and analysis and these are:

1. The bank should adopt a credit grading system. All facilities should be assigned a risk grade.
And, the borrowers’ risk grades should be clearly stated on credit application.
2. The responsibilities of the key persons of the above function must also be clearly specified.
3. Bank should make proper and exhaustive documentation before disbursement and to ensure
proper supervision, monitoring and follow up of each credit.
4. The credit sanction procedure should be made quicker since competition is very hard in
today's business world. People do not want to wait for three to four weeks on an average to get
a loan which is even protected by security.
5. interest rate should be reduced for CC account (Cash Credit)
6. Should open more branches in rural areas
7. Should focus more on credit cards and ATM booths
8. The Branch needs to develop the credit policy and procedure
9. The branch needs to improve the credit amount and credit facilities

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6.2 Conclusions:
A banker cannot sleep well with bad debts in his portfolio. The failure of commercial banks occurs
mainly due to bad loans, which occurs due to inefficient management of the loans and advances
portfolio. Therefore any banks must be extremely cautious about its lending portfolio and credit
policy. So far National Bank Limited has been able to manage its credit portfolio skillfully and kept
the classified loan at a very lower rate.
All things around us are changing at an accelerating rate. Today is not like yesterday and tomorrow
will be different from today. The Credit Management system that may seem fit today but may not
work tomorrow. So, by taking consideration the fast changing, dynamic global economy and the
increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential
that National Bank limited has a robust credit risk management policies and procedures that are
sensitive to these changes.
From the discussion in this report, it has become clear that credit risk management is a complex and
ongoing process and therefore financial institutions must take a serious approach in addressing these
issues. They have to be up to date in complying with all the required procedures and must employ
competent people who have the ability to deal with these complex matters. Utmost importance should
be given to the improvement of the networking system which is essential for modern banking
environment and obviously for efficient and effective credit risk management process.

54
Reference
[1] Annual Report
[2] Credit Risk Grading Manual
[3] www.nblbd.com
[4] en.wikipedia.org/wiki/Bank
[5] Foundations of financial management by Stanley B. Block & Geoffrey A. Hirt.
[6] NBL’s retail banking service prospectus.
[7] Articles published on Credit Department information.
[8] Credit Risk Measurement: New approaches to Value at Risk and otherParadigms by Anthony
Saunders.
[9] www.bis.org/publ/bcbs54.htm
[10] Credit Policy and risk management guide of National Bank Ltd

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