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Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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A COMPARATIVE ANALYSIS ON RETAIL CREDIT

IN CONTEXT OF PRIME BANK LIMITED, BANGLADESH.

(THIS OCP REPORT IS SUBMITTED FOR THE PARTIAL FULFILMENT OF THE DEGREE OF MASTERS OF BUSINESS ADMINISTRATION WITH MAJOR IN MARKETING)

Supervised By:

Md Hafij Ullah

Assistant Professor Department of Business Administration Prepared by: MD. SAIFUL MOWLA RIZVI BHUIYAN Metric
Assistant Professor
Department of Business Administration
Prepared by:
MD. SAIFUL MOWLA RIZVI BHUIYAN
Metric No#R101133
Program: Masters of Business Administration (MBA)
Major: Marketing
Trimester: Autumn-2010
Submission Date: January 5, 2011
Signature of Supervisor

Department of Business Administration Faculty of Business Studies INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

1.0: INTRODUCTION

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Banking system occupies an important place in a nation’s economy. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country. The banking sector channels resources through deposit mobilization and providing credit for different business ventures.

At new millennium the definitions of banking has been changed. Now banks are performing more
At new millennium the definitions of banking has been changed. Now banks are performing
more vital role in the society in than before. Due to globalization and technical innovation
banking business has become very competitive. The share of deposits of nationalized
commercial banks in total deposits which was 89% in 1980 gradually declined over the years
to reach the level of 36% in 2009. Simultaneously, private commercial banks which were
responsible for only 18% of deposits in 1985 this share increased gradually over the years to
constitute about two third of the total deposits.
When I was assigned to prepare an OCP Report on my own interest I have chosen this sector
because of its crucial role in development of our economy. I became more involve through
my OCP on Prime Bank Limited. I have found that although there are many studies involving
individual banking activities there are few study about the comparative study among the
banks. It is now time to start a review among the forth generations banks and their
competitive position. In my report I intend to make a comparative study among the forth
generation banks banking activities.
1.1 Origin of the Report
OCP report is the ending of perfect synchronization among academic and practical practice
throughout the session. This report includes evaluation of the performance of PCB and its
risk management.

Education is not presently restricted to paperback. Learning is the instrument to recognize the actual globe and certain understanding for the betterment of the world as well as business.

Consequently, an occasion is presented by International Islamic University Chittagong (IIUC) for its impending business alumnae to get three months realistic understanding and known as “Internship Program” or “OCP Program”. For the contest of this program, I was placed in a Bank namely, “Prime Bank Limited (PBL)”.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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1.2 Objectives of the Study

The main objective of this study is to explore the Comparative Analysis on retail credit in context of Prime Bank Limited Bangladesh.

Specific objectives are

To analyze the current retail credit product Portfolio To analyze the credit assessment, approval and disbursement procedure To find out the trend of
To analyze the credit assessment, approval and disbursement procedure To find out the trend of credit disbursement in term of retail credit To find out To analyze the current retail credit product Portfolio the Comparison between PBL’s Retail Credit Disbursement And the Comparison between PBL’s Retail Credit Disbursement And Recovery% To know the current position of PBL in comparison with four other similar second generation private commercial banks based on retail credit.

1.3 Scope of the Study The report intends to assess the position of Retail Credit
1.3 Scope of the Study
The report intends to assess the position of Retail Credit finance and Retail Credit
promotional facilities, its procedure, types, problems etc. This study covers the period since
incorporation of the Bank.
The report is prepared with a view to provide a brief but complete idea about' consumer
Credit Scheme. The readers will also understand the Retail Credit procedures and
performance of Prime Bank Limited. Problems and prospects of Retail Credit have been
identified from the view of the bankers. Some finding and recommendation have been
mentioned in the report.
1.4 Methodology
Basically secondary data was used in the research. Secondary data was collected from annual
report and publication of the prime bank, Statistical book, literatures, books and international
publications and websites. It is a descriptive research and it is also known as desk research.

1.4.1 Research Design

The research design is descriptive research from the view point of function and nature of data. From the view point of research place, it is a desk as well as a field research and finally from the viewpoint of objective it is a Basic research.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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1.4.2 Data Collection

The financial figures were collected from the Prime Bank Limited Laldighi Branch database

as well as from the periodical financial statements of the Bank. Among secondary data

sources the most remarkable is the annual report of the bank.

1.4.2.1 Primary data

I have collected primary data by interviewing employees of prime Bank Ltd. Primary data

were derived throughout the employees of the organization. Clarifications of issues came

from different concerned officials of prime Bank Ltd. I have collected primary data in the
from different concerned officials of prime Bank Ltd. I have collected primary data in the
following way
Face to face dialogue with employees
Informal conference and conversation.
1.4.2.2 Secondary data
I have used diffident types of secondary data in my research. Sources of secondary data are as
follows:
Annual reports
Prospectus
Publications
CIB reports
The Bank's internal records.
1.4.3 Data Analysis
The collected data have then processed analyzed and the findings thereof have laid the basis
of procedure analysis, comparison on the basis of internal and external different criteria.
1.5 Limitations of the Study
I have obtained enthusiastic co-operation of the employees of Prime Bank Limited. Several
limitations have taken in my project. Among them the following worth mentioning:
Time constrains: The time frame for the preparation of the report was not sufficient.

Inexperience: During the OCP session, in many part of my inquiry, my performance During the OCP session, in many part of my inquiry, my performance

was stuck by some lacking in experience.

Lack of information due to confidential reason: The survey on retail credit was The survey on retail credit was

conducted in commercial banks. But the response was not inspiring, on the pretext of

confidentially. For having inadequate data, extensive statistical analysis e.g.

hypothesis testing, inferences, time series analysis etc. was not possible.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

2.1: A BRIEF PROFILE OF PRIME BANK

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Prime Bank Limited, a scheduled bank, was incorporated under the Companies Act 1994, and started its operation on April 17, 1995 with the target of playing the vital role in the socio- economic development of the country as well as earning profit. It was registered as a banking company under the Bank Company Act 1991 from the Bangladesh Bank on February 12, 1995. The bank started making profit from the year of its inception. The first Managing Director, Mr. Lutfar Rahman Sarkar, Ex-Governor, Bangladesh Bank, provided required leadership for a newly established bank.

Prime Bank Limited is a second - generation private commercial bank has been working for
Prime Bank Limited is a second - generation private commercial bank has been working for
stimulating trade and commerce, accelerating the pace of industrialization, boosting up
export, creating employment opportunity, alleviating poverty, raising standard of living of the
people etc and thereby contributing to the sustainable development of the country. At present,
the bank has a network of 84 (Eighty Four) branches with around 1500 employees stationed
in both rural and urban areas of the country. Since inception, the Bank has been making
significant profit every year and positioning itself as second highest profit-making bank in the
country for last five consecutive years. This has been possible due to significant growth of the
bank. This has also been possible due to minimize the risks of the bank successfully.
The bank serves its customers with the following motto— ‘A Bank with a difference’.
2.2 Mission of Prime Bank Limited
To build Prime bank limited into an efficient, market driven, customer focused
institution with good corporate governance structure.
Continuous improvement in our business policies, procedure and efficiency through
integration of technology at all levels.
2.3 Vision of Prime Bank Limited
To be the best Private Commercial Bank in Bangladesh in terms of efficiency, Capital
adequacy, asset quality, sound management, customer service, profitability, technology
application and having strong Liquidity.
2.4 Awards & Achievement of PBL
strong Liquidity. 2.4 Awards & Achievement of PBL In last 15 years, PBL has become as

In last 15 years, PBL has become as a top tier bank of Bangladesh by providing

superior service quality, portraying powerful brand image, building strong corporate

governance and a culture committed to excellence. In recognition of PBL’s

performance, accountability, transparency and good governance, the bank was

awarded four times in a row as best bank in Bangladesh for its published accounts and

reports by ICAB (Institute of Chartered Accountants of Bangladesh).

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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on Retail Credit in Context of Prime Bank Limited 6 PBL also honored by SAFA (South

PBL also honored by SAFA (South Asian Federation of Accountants) Bronze award

in region for its published accounts in 2007. For the first time any Bangladeshi bank

has achieved this feat.

2.5 Long term & Short term Rating of PBL

Credit Rating of Prime Bank Limited by CRISL:

Table 2.1: Credit Rating

Long Term Short Term Surveillance Rating 2008 AA ST-1 Surveillance Rating 2008 AA ST-1 Out
Long Term
Short Term
Surveillance Rating 2008
AA
ST-1
Surveillance Rating 2008
AA
ST-1
Out Look
Stable
Date of Declaration
June 16, 2009
2.6 Strategic Priority
To have sustained growth, broaden and improved range of products and services in all areas of
banking activities with the aim to add increased value to shareholders investment and offer
highest possible benefits to the customers.
2.7 Products and Services
The bank serves its huge clientele with a variety of services apart from the traditional ones.
Its continual improvement and introduction of new products and services has given it an edge
over the competitors.
2.7.1 Depository Services
The bank provides the following depository services and collects a huge amount of its
deposits. The services are:-
1. Contributory Savings Scheme
9. Prime Bank Money Scheme
2. Monthly Benefit Deposit Scheme
10. Multi currency Account
3. Special Deposit Scheme
11. Foreign Currency Deposit Account
4. Education Saving Scheme
12. Non Resident Taka amount

5. Fixed Deposit Receipt

6. Savings Deposit Account

7. Short Term Deposit Account

8. PBL- Insured Fixed Deposit Scheme

13. NFCD ( Non Resident Foreign Currency) Account

14. Non resident Investors Account

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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2.7.2 Loan Services

Loans and advances have primarily been divided into two major groups:

advances have primarily been divided into two major groups: Fixed term loan These are the loans

Fixed term loan

These are the loans made by the Bank with fixed repayment schedules. Fixed term

loans are categorized into three based upon its tenure which is defined as follows:

Short term : up to 12 months

Medium term : More than 12 and up to 36 months Long term : More
Medium term : More than 12 and up to 36 months
Long term : More than 36 months
Continuing Loans
These are the loans having no fixed repayment schedule but have an expiry date at
which it is renewable on satisfactory performance of the customer.
Furthermore all categories of loans are accommodated under the 7 prime sectors
which are as under:
a. Agriculture
b. Term Loan to Large & Medium Scale Industry
c. Term Loans to Small and Medium Enterprise(SME)
d. Working Capital
e. Export Credit
f. Commercial Lending
g. Others
2.7.3 Other Services
The bank firmly believes that technology based product and services will play significant role
in the performance of the bank as people are getting more conscious about their service they
receive from a bank. For delivering faster service the bank has introduced online banking
service. The bank has introduced other products and services to serve the ever-changing

market. These are:

SWIFT servicesand services to serve the ever-changing market. These are: L/C Delivery Services Locker Services Merchant Banking

L/C Delivery Servicesto serve the ever-changing market. These are: SWIFT services Locker Services Merchant Banking Services ATM services

Locker Servicesto serve the ever-changing market. These are: SWIFT services L/C Delivery Services Merchant Banking Services ATM

Merchant Banking Servicesservices to serve the ever-changing market. These are: SWIFT services L/C Delivery Services Locker Services ATM

ATM servicesserve the ever-changing market. These are: SWIFT services L/C Delivery Services Locker Services Merchant Banking Services

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3.0 Review of the Literature on Retail Credit

Today’s banking industry is experiencing renewed interest in retail credit as one of the strategic key tools of risk diversification. Retail credit lending is one kind of services that banks provide to individuals with a cluster of products through branches, internet and other channels (Clark et al., 2007).

According to Gopinath (2005), retail credit is, however, quite broad in nature - it refers
According to Gopinath (2005), retail credit is, however, quite broad in nature - it refers to the
different retail credit products that commercial banks provide to individual customers. Retail
credit is becoming an increasingly complex concept to define. The operation of providing
retail credit is called retail lending or retail credit financing. While” pure” retail credit is
generally conceived to be the provision of mass market lending services to private
individuals, it has been expanded over the years to include in many cases services provided to
small- and medium sized business people. Again, retail or consumer credit refers to the debts
(credits) of consumers involved in procuring consumer goods for the consumption of
themselves and their families (Westerfield, 1998).Stiroh (2004) has described retail lending
as “hotter than Vindaloo”, considering the fact that, “Vindaloo” the Indian-English
innovative curry available in the restaurants of London is very hot and spicy. It seems that,
retail lending is perceived to be the in-thing in today’s world of banking. He has also
mentioned that today's retail lending sector is characterized by three basic characteristics:
multiple products (home loan, car loan, vacation loan, travel loan etc), multiple channels of
distribution (call centre, branch, internet and multiple customer groups (consumer, small and
corporate business people for daily needs).

3.1 Market for Retail Lending According to the statistics and market research papers available, the retail lending market in Bangladesh has a size of BDT 160 billion whereas loan outstanding as of September 30, 2009 as per Scheduled Bank Statistics of Bangladesh Bank is around BDT 48 billion (Categorized under: Advances for professional services, Flat purchase, Consumer Goods, purchase through credit cards, educational expenses etc). This indicates that only 30% of the market has been realized by the financial institutions. So the remaining 70% of the market holds true potential for the loan giving institutions.

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4.0 RETAIL CREDIT PRACTICE IN PRIME BANK LTD

The Prime Bank Limited started to provide retail credit informally from the year 1999 as a part of its core business. It was then one of the negligible parts of total credit and advance and was provided to few number of individuals under the name of “Others” sector. From 2005, PBL started to expand its retail credit activities far more than the previous years as a part of risk diversification strategy. Since then, retail credit has been targeted for significant further growth.

The Loans and Advances cover following core areas: Corporate Loan, House Loan, SME, Retail Credit
The Loans and Advances cover following core areas: Corporate Loan, House Loan, SME,
Retail Credit and Credit Card.
4.1 Background of Retail Credit
Retail Banking is a fast moving sector by virtue of product and service differentiation,
customer acquisition and retention, and the integration of wealth management and aggressive
sales proposition. Today, banks make much of their profits from retail banking. Growth in
profit from retail lending is much higher than those from the more volatile business of
corporate and wholesale banking. Recently in Bangladesh, some private and foreign
commercial banks are aggressively moving ahead into retail banking products and services.
Success and growth of Retail banking depends on some pillars. Direct sales team is one of
most inevitable pillars for the success of retail banking which ensures management of retail
bank business more structured way. The direct sale team plays a major role in business
growth of bank by generating sales lead and making countless relationship contact with the
customers.
4.2 Market Share of Retail Loan / Retail Credit
customers. 4.2 Market Share of Retail Loan / Retail Credit Retail Loan as a percentage of

Retail Loan as a percentage of overall loan shows an upward trend from year 2005 and it continues till date. FCBs were the pioneer in Retail Lending, PCBs are becoming aggressive and we see gradual increase of market share of PCBs in RL market Prime Bank is also gradually having a bigger bite in the RL market along with other PCBs

4.3 Retail Credit Scheme

Retail Credit Scheme is generally known as Consumer Credit Scheme (CCS). Consumer Credit is the combination of two words- Consumer and Credit. Consumer means one who

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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consumes or it also means one who uses article produced. Credit comes from the Latin word

Credo meaning I believe. When one borrows money, the loan is based upon confidence in the

future solvency of the person and in his repaying the loan as per agreement. Consumer Credit

Scheme is a new concept in Bangladesh and it proves the consumers equity participation.

First, Islami Bank Bangladesh Ltd. and then Prime Bank Ltd. introduced this scheme for

developing the standard of living of fixed income group and middle class people. Under

consumer Credit Scheme the credit is provided for household durables and utility products goods like
consumer Credit Scheme the credit is provided for household durables and utility products
goods like Car, Pick-up, Motor Cycle, Personal Computer, Televisions, and Refrigerator
water Cooler, Furniture and Fixture, Crockery and Cutlery, Sewing Machine, Air Conditioner
etc.
4.3.1 Objectives of Consumer Credit Scheme
Every scheme is covered through some objectives, which is prepared in line with the
corporate goal, mission and vision. The objectives of introducing consumer credit scheme by
banks are considered to be as follows-
To bring our credit services to a wide range of customers.
To provide financial assistance to the limited income group towards buying utility
products.
To help the professionals in raising their standard of living. To participate in the
socioeconomic development of the country. To fulfill the dream whatever they want
to buy, can afford.
To sell our services to a wide range of customers and increase our Consumer Credit
Scheme portfolio.
To provide financial assistance to the limited income group for buying household
durables and utility products.
To provide investment facility to the depositors of the bank. To develop small
capitalist or industrialist.
To build up strong communication to a wider range of customer through provide loan.
To enhance job opportunities through credit facilities.
4.4 Promotional Activities

For promotional activities, PBL has recruited

Around eighty number of Direct Sales Agents (DST) who reaches from door to door to aware people about PBL retail credit.Activities For promotional activities, PBL has recruited Paper advertisement and TV advertisement is regularly

Paper advertisement and TV advertisement is regularly published.(DST) who reaches from door to door to aware people about PBL retail credit. PBL sometimes

PBL sometimes arranges retail loan fair.door to door to aware people about PBL retail credit. Paper advertisement and TV advertisement is

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5.0

LIMITED

THE

CONSUMER

LOAN PRODUCT

PORTFOLIO

OF

PRIME

BANK

The Consumer Loan Products are as follows:

1. Personal Loan (Secured)

2. Personal Loan (Unsecured)

5.1. Personal Loan (Secured) Eligible: Any person having a CD/SB/STD Account. Margin: Best effort basis.
5.1. Personal Loan (Secured)
Eligible: Any person having a CD/SB/STD Account.
Margin: Best effort basis. Accrued interest to be serviced quarterly.
Limit: As per delegation of power circulated from time to time.
Security: Lien on FDR and any other savings instruments duly discharged with letter
of authority to Ancash in case of default.
Rate of Interest: In case of FDR: 2-3% above FDR interest rate. In case of other
deposit- 14% p.a with quarterly interest.
Period: Maximum 12(twelve) months (renewable as applicable)
5.2. Personal Loan (Unsecured)
Household Durable Loan
Car Loan
Doctors Loan
Advance Against Salary
Any Purpose Loan
Education Loan
Travel Loan
Marriage Loan
CNG Conversion Loan
Hospitalization Loan

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5.2.1 Household Durable Loan

Under This head, Loans will be sanctioned against guarantee of third parties acceptable to the

bank or pledge of FDR. Saving instrument of Banks and assignment of salary where

applicable.

The loan limit, down payment, risk fund, service charge and period of loans are given

below:

Table 5.1: Features of Household Durable Loan Sanctioning Authority Name of the Item Loan Down
Table 5.1: Features of Household Durable Loan
Sanctioning Authority
Name of the Item
Loan
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
Motor Cycle
Tk.
1
10%
1%
1%
2
years
Full Limit
Lac
PC/ Laptop
Tk.
1
10%
1%
1%
2
years
Full Limit
Lac
Photocopier/Fax
Tk.
1
10%
1%
1%
2
years
Full Limit
Lac
Other
Item/
Tk.
5
10%
1%
1%
3-4
3 Lac
Full
Furniture
Lac
years
Limit
Interest Rate:
17%
Repayment method:
Disbursement mode:
Other Charges:
Monthly equal installment
Pay order directly issued in the name of respective company of
purchase.
1% on the loan amount or Tk. 1000 whichever is
higher+15%VAT
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
Monthly Income:
2% of the installment overdue
Tk. 475
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Tk. 15,000 for salaried individuals
Tk. 20,000 for businessman
Security:

Two Personal gaurantee

Undated cheques

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5.2.2 Car Loan

For purchasing of non-commercial, new and reconditioned vehicles, this loan is given for

personal use of the individual. Instead of down payment, the Customer shall have option to

avail loan against their FDR or any other savings instruments up to 90% of the loan amount.

The loan limit, down payment, risk fund, service charge and period of loans are given below:

Table 5.2: Features of Car Loan Sanctioning Authority Name of the Item Loan Down Risk
Table 5.2: Features of Car Loan
Sanctioning Authority
Name of the Item
Loan
Down
Risk
Service
Ternor
Retail
Head
Limit
Payment
Fund
Charge
Banking
Office
HO/Branch
Credit
New Vehicle
Tk
20
10%
Nil
1%
5
Years
Tk. 10 Lac
Tk 20 Lac
Lac
Recondition
Tk
20
10%
Nil
1%
5 Years
Tk. 10 Lac
Tk 20 Lac
Vehicle
Lac
Bus/Truck for
Corporate bodies
for own use only
Tk
20
10%
Nil
1%
5
Years
Lac
Any Limits would be
approved by EC/ Board
Interest Rate:
15%
Repayment method:
Disbursement mode:
Other Charges:
Monthly equal installment
Pay order directly issued in the name of respective car
company.
1% on the loan amount or Tk. 1000 whichever is
higher+15%VAT
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:

Monthly Income:

2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 20,000 for salaried individuals Tk. 40,000 for businessman

Security:

Two Personal guaranteesalaried individuals Tk. 40,000 for businessman S ecurity: Undated cheques Registration of the Vehicle in the

Undated chequesTk. 40,000 for businessman S ecurity: Two Personal guarantee Registration of the Vehicle in the name

Registration of the Vehicle in the name of the bank.of loan. Tk. 20,000 for salaried individuals Tk. 40,000 for businessman S ecurity: Two Personal guarantee

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5.2.3 Doctors Loan

Any Bangladeshi citizen who is a graduate in Medical science/ Dentist/ Eye/ Allopathic/

General Practitioners desiring to setup chamber, medical store with necessary medical

equipments and to become self- employed have the opportunity to take this loan.

The loan limit, down payment, risk fund, service charge and period of loans are given

below: Table5.3: Features of Doctors Loan Sanctioning Authority Loan Down Risk Service Period Retail Head
below:
Table5.3: Features of Doctors Loan
Sanctioning Authority
Loan
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
General
Tk.
5
10%
Nil
1%
4 Years
Tk. 3 Lac
Full Limit
Practitioner
Lac
MBBS/BDS
Specialized
Tk.
10
10%
Nil
1%
5 Years
Tk. 5 Lac
Full Limit
Doctor
Lac
Interest Rate:
17%
Repayment method:
Monthly equal installment
Disbursement mode:
Clients’ savings account or sometimes cash disbursement.
Other Charges:
1%
on
the
loan amount
or
Tk.
1000
whichever
is
higher+15%VAT
Penalty Charge :
Stamp Charge :
Early Settlement :
Criteria for application:
2% of the installment overdue
Tk. 470
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Income Tk. 15,000 for salaried individuals
Income Tk. 25,000 for businessman

Security:

Two Personal gauranteeindividuals Income Tk. 25,000 for businessman Security: Undated cheques The ownership of Medical equipments to be

Undated chequesTk. 25,000 for businessman Security: Two Personal gaurantee The ownership of Medical equipments to be purchased

The ownership of Medical equipments to be purchased must be hypothecated to theIncome Tk. 25,000 for businessman Security: Two Personal gaurantee Undated cheques bank under hire purchase mood.

bank under hire purchase mood.

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5.2.4 Advance against Salary

To meet the financial needs for any acceptable purpose, this loan can be given.

The loan limit, down payment, risk fund, service charge and period of loans are given

below:

Table 5.4: Features of Advance against Salary

Sanctioning Authority Load Down Risk Service Period Retail Head Limit Payment Fund Charge of Loan
Sanctioning Authority
Load
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
Salaried Person
Tk.
3
Nil
0
1%
2 Years
Tk.
1.50
Full Limit
Lac
Lac
Note: Risk Fund is nil who has salary account with us.
Interest Rate:
17%
Repayment method:
Monthly equal installment
Disbursement mode:
Clients’ savings account or sometimes cash disbursement.
Other Charges:
1%
on
the
loan amount
or
Tk.
1000
whichever
is
higher+15%VAT
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
2% of the installment overdue
Tk. 320
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
5.2.5 Any purpose Loan
The loan limit, down payment, risk fund, service charge and period of loans are given
below:
Table 5.5: Any Purpose Loan
Sanctioning Authority
Load
Down
Risk
Service
Period
of
Retail Banking
Head
Office
Limit
Payment
Fund
Charge
Loan
HO/Branch
Credit
Tk. 3 Lac
Nil
1%
1%
3 Years
Full Limit

Note: Risk Fund is nil who has salary account with us.

Interest Rate:

Repayment method:

17%

Monthly equal installment

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

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Disbursement mode:

Other Charges:

Clients’ savings account or sometimes cash disbursement.

1%

on

the

loan

amount

or

Tk.

1000

is

higher+15%VAT

2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 25,000 for businessman

whichever

Penalty Charge:

Stamp Charge:

Early Settlement:

Criteria for application:

Monthly Income:

Security: Two Personal gaurantee Undated cheques Lien on Service benefit of the concerned employee from
Security:
Two Personal gaurantee
Undated cheques
Lien on Service benefit of the concerned employee from the employer
5.2.6 Education Loan
For educational purposes like study in abroad or within the country, this loan is given.
Table 5.6: Features Education Loan
Sanctioning Authority
Name of the Item
Load
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
Salaried
Person/
Tk.
3
10%
1%
1%
2 Years
Tk.
1.50
Full Limit
Businessman
Lac
Lac
Note: Risk Fund is nil who has salary account with us.
Interest Rate:
17%
Repayment method:
Monthly equal installment
Disbursement mode:
Clients’ savings account or sometimes cash disbursement.
Other Charges:
1%
on
the
loan amount
or
Tk.
1000
whichever
is
higher+15%VAT
Penalty Charge:

Stamp Charge:

Early Settlement:

Criteria for application:

Monthly Income:

2% of the installment overdue Tk. 475 At any time with no penalty charge Any Bangladeshi citizen of 25-60 years at the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 20,000 for businessman

Security:

Two Personal gauranteeat the time of maturity of loan. Tk. 10,000 for salaried individuals Tk. 20,000 for businessman

Undated chequestime of maturity of loan. Tk. 10,000 for salaried individuals Tk. 20,000 for businessman Security: Two

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

17

5.2.7 Travel Loan

To meet the financial needs for travel purpose, this loan can be given. Features of this loan are

following:

Table 5.7: Features of Travel Loan

Sanctioning Authority Name of the Item Load Down Risk Service Period Retail Head Limit Payment
Sanctioning Authority
Name of the Item
Load
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
Salaried
Person/
Tk.
2
10%
1%
1%
3 Years
Tk.
1.50
Full Limit
Businessman
Lac
Lac
Interest Rate:
17%
Repayment method:
Monthly equal installment
Disbursement mode:
Clients’ savings account or sometimes cash disbursement.
Other Charges:
1%
on
the
loan amount
or
Tk.
1000
whichever
is
higher+15%VAT
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
2% of the installment overdue
Tk. 320
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Monthly Income:
Tk. 12,000 for salaried individuals and Tk. 25,000 for
businessmen(For rented people)
Tk. 10,000 for salaried individuals and Tk. 15,000 for
businessmen( for those who are residing in his/her own or family
residence)
Tk. 10,000 for Govt., Semi-Govt and autonomous bodies
employees.
Security:
Two Personal gaurantee
Undated cheques

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

18

5.2.8 Marriage Loan

The loan limit, down payment, risk fund, service charge and period of loans are given

below:

Table 5.8: Features of Marriage Loan

Sanctioning Authority Name of the Item Load Down Risk Service Period Retail Head Limit Payment
Sanctioning Authority
Name of the Item
Load
Down
Risk
Service
Period
Retail
Head
Limit
Payment
Fund
Charge
of Loan
Banking
Office
HO/Branch
Credit
Salaried
Person/
Tk.
3
10%
1%
1%
3 Years
Tk.
1.50
Full Limit
Businessman
Lac
Lac
Interest Rate:
17%
Repayment method:
Monthly equal installment
Disbursement mode:
Clients’ savings account or sometimes cash disbursement
Other Charges:
1%
on
the
loan amount
or
Tk.
1000
whichever
is
higher+15%VAT
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
Monthly Income:
2% of the installment overdue
Tk. 320
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Tk. 15,000 for salaried individuals
Tk. 20,000 for businessman
Security:
Two Personal gaurantee
Undated cheques

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

19

5.2.9 CNG Conversion Loan

The loan limit, down payment, risk fund (nil), service charge and period of loans are given

below:

Table 5.9: CNG Conversion Loan

Sanctioning Authority Name of the Load Down Risk Service Period Retail Head Item Limit Payment
Sanctioning Authority
Name
of
the
Load
Down
Risk
Service
Period
Retail
Head
Item
Limit
Payment
Fund
Charge
of
Banking
Office
Loan
HO/Branch
Credit
Owner/
Valid
Tk.
60
10%
5%
loan
Tk.
1.5
Full Limit
user
of
the
Thousand
amount
1000
or
years
vehicles
1%
Corporate
Tk. 1 Lac
10%
5% Loan
Tk.
1.5
Full Limit
Bodies
Amount
1000
or
years
1%
Interest Rate:
17%
Repayment method:
Disbursement mode:
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
Monthly Income:
Monthly equal installment
In the form of pay-order
2% of the installment overdue
Tk. 475
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Tk. 15,000 for salaried individuals
Tk. 20,000 for businessman
Security:
One or Two Personal gaurantee
Undated cheques

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

20

5.2.10 Hospitalization Loan

Table 5.10: Hospitalization Loan

Name of the Loan

Loan Limit

Branch

Head Office

Hospitalization Loan

Tk. 5 Lac

Tk. 3 Lac

Full Limit

Interest Rate:

15%

Repayment method:

Monthly equal installment

Disbursement mode: Clients’ savings account .In case of salaried individuals, sometimes cash disbursement may happen.
Disbursement mode:
Clients’ savings account .In case of salaried individuals,
sometimes cash disbursement may happen.
Penalty Charge:
Stamp Charge:
Early Settlement:
Criteria for application:
Monthly Income:
2% of the installment overdue
Tk. 320
At any time with no penalty charge
Any Bangladeshi citizen of 25-60 years at the time of maturity
of loan.
Tk. 10,000 for salaried individuals
Tk. 20,000 for businessman
Security:
Personal guarantee from an individual having means, standing and social status
acceptable to the bank and another from his/her family
24 (twenty four) post dated cheques
Letter of Assurance from the Employer / Authority.
For any retail loan application, Tk. 50 is taken as a fee.
5.3 Documents Required
To apply for any of the above retail loan of PBL, a client needs his/her photographs, copy of
passport/ID card, last one year’s bank statement, copy of TIN, trade license(for businessmen),
personal net worth statement etc.
One of the special criteria of retail credit or consumer credit is that, it is an unsecured loan as
there is no requirement for collateral except letter of guarantee.
Besides these, following legal documents are needed to get any retail credit from PBL.

Duly filled in loan application form with terms and condition signeddocuments are needed to get any retail credit from PBL. Demand Promissory Note Letter of Set-Off

Demand Promissory Notein loan application form with terms and condition signed Letter of Set-Off Irrevocable Letter of Authority

Letter of Set-Offform with terms and condition signed Demand Promissory Note Irrevocable Letter of Authority to repossess the

Irrevocable Letter of Authority to repossess the vehicle(for car loan)condition signed Demand Promissory Note Letter of Set-Off Ownership transfer form signed by customer(for car loan)

Ownership transfer form signed by customer(for car loan)Letter of Authority to repossess the vehicle(for car loan) Letter of Introduction(for salaried person) and Letter

Letter of Introduction(for salaried person) andOwnership transfer form signed by customer(for car loan) Letter of offer with full terms and conditions

Letter of offer with full terms and conditions stated therein and duly accepted.car loan) Ownership transfer form signed by customer(for car loan) Letter of Introduction(for salaried person) and

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

21

6.0 CREDIT ASSESSMENT, APPROVAL AND DISBURSEMENT PROCEDURE

6.1 Credit Assessment

The prior condition for any credit disbursement is to critically assess and approve the credit proposal that is the client selection and assessment. In case of retail credit it should be done more crucially as retail lending is one of the types of unsecured individual lending without collateral. The primary factor determining the quality of the Bank’s credit portfolio is the ability of each borrower to honor, on timely basis, all credit commitments made to the Bank that is, repayment of loan installment on time.

In PBL, more emphasis is given on repayment potential of loans out of funds generated
In PBL, more emphasis is given on repayment potential of loans out of funds generated from
borrower’s business (cash flow) instead of realization potential of underlying securities while
assessing a retail credit proposal. Following are the steps that are maintained in PBL for
assessing any retail credit proposal.
6.1.1 Application
The first stage of retail credit assessment and approval process is a client application that
contains the following information:
Telephone and address / contact details
Employment/business details
Income Details
Income and Expenditure Statement
Personal Net worth Statement
Residence details
Credit references and guarantors details

Basically, branches receive the client application with other required papers necessary for different retail loans.

6.1.2 Contact Point Verification (CPV)

Verification is a key part of application process. Contact point verification is done for all applicants except for the High Net Worth individuals or the clients having good account

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

22

relationship with Bank. The object ive of this process is to check the declared/undeclared information of the applicants. CPV includes:

Applicant’s Residence, business/office address, phone, status varification varification

Guarantors Information Verificationbusiness/office address, phone, status varification Bank statement and other income documents verification. In

Bank statement and other income documents verification.status varification Guarantors Information Verification In most of the times, CPV is done by branch managers.

In most of the times, CPV is done by branch managers. CPV is done by third party agency also to enable the client selection of better accounts for accelerated processing and quick rejection of those having negative/inadequate information. Retail credit officers then verify data collected by third part.

6.1.3 Guarantee One of the fundamental perquisites for securing retail credit is to obtain guarantee
6.1.3 Guarantee
One of the fundamental perquisites for securing retail credit is to obtain guarantee acceptable
to the bank by way of social status and perceived creditworthiness. Retail cred it officers at
branch level check the guarantors’ information very carefully. In case of guarantors,
following are the rules that are maintained:
Existing guarantor of any other loan of the bank will not be accepted as other
guarantor for other loans.
Any existing borrowers will not be taken into account as a guarantor for any other
loan.
Guarantee from the Chairman, Managing Director and Directors of Corporate facility
clients and obtaining will be allowed after the prior approval of Head Office.
All guarantors will be verified whether they have any relationship with banks earlier
with either positive or negative status.
6.1.4 Checking against Bank’s Database

All approved applicants are checked against Bank’s database to identify whether the applicant is enjoying any other loan in other accounts part from the declared loans. Whether the client has any other loan with any other bank is also important to know for client selection. In this case, CIB (Credit Information Bureau) are sent in a specific form to Bangladesh Bank.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

23

Within the time of the CIB returned back to the branch, the retail credit officers of the branch

make a credit proposal for further assessment and approval. CIB reports are requested for any

amount equivalent to Tk. 50,000 and above that. After returning the CIB information, the

credit proposal along with documents is sent to Retail Credit Head Office (RHO).Up to this

point at branch level, almost seven to ten days are required for processing.

6.1.5 Assessment Method

Assessment of credit proposal and credit approval are done in Head office of retail The
Assessment of credit proposal and credit approval are done in Head office of retail
The assessment method can be divided in two steps.
The first step is known as “Credit Scoring” which is done to predict the creditworthiness of
applications. A prior designed excel sheet is there to score in point values of some important
aspects of clients such as occupation, residence status, income details etc. The total of these
point values in 100 points represents the repayment probability of that particular client. The
higher the value, the probability of getting approval for credit is higher.
The second step is known as “Judgmental Decision”. Application meeting the minimum cut-
off score and meeting other criteria is further reviewed for judgmental decision. After credit-
scoring method is completed, all the credit proposals are presented in the board meeting for
approval. The judgmental approval involves the assessment of an applicant’s character,
capacity and collateral.
6.2 Credit Approval Process
There is a credit approval authority to finally decide whether the retail loan should be
sanctioned or not. The authority includes
The Board of Directors
The Executive Committee of the Board
The Managing Director

The Deputy Managing DirectorThe Executive Committee of the Board The Managing Director Retail Credit Committee After presenting the credit

Retail Credit CommitteeBoard The Managing Director The Deputy Managing Director After presenting the credit proposals, the authority

After presenting the credit proposals, the authority critically analyze the aspects and after

that, the authority finally decides about the retail credit sanction. The members of the

authority have some individual delegation power of retail credit, which is limited by Tk.

amount. Up to this point, three to four days are required for processing.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

24

The Success of any credit largely depends on its efficient administration. A bank has to undertake different policy prescription to manage the credit in line of the set objectives. Banks always monitor the performance of the loan so that the rate of default is less. This chapter concentrates on the various aspects of consumer credit provided by Bank. Consumer credit scheme is small and medium term loan. This credit is sanctioned for one to five year’s period.

For the small size and three years period of loan, every branch of the Bank
For the small size and three years period of loan, every branch of the Bank has the authority
to sanction the loan. But the branches have some loan limit to provide the scheme in different
goods. The Bank maintains some policies and guidelines to sanction the credit.
Every branch of the Bank has a credit committee in order to facilitate quick sanction of loan
under the scheme. The credit committee is constituted of in each of the designated branche s
with the following Executive/Officer:
Credit Committee
Branch Manager
2 nd Officer
Credit In Charge
CCS In Charge
At first, the sanctioning of loan, the customer will approach to Consumer Credit In-Charge
for getting the loan Under Consumer Credit Scheme. If the Consumer Credit Scheme in-
charge thinks that he or she is eligible for the credit then they get the opportunity for
application of loan.

After that, the Consumer Credit Scheme in-charge presents the application to Credit Committee of the respective branch. If the committee approves that the customer is eligible for the loan then the customer will submit the necessary documents to that Committee. After submission of the documents the credit committee will examine the documents and consumer credit scheme in change will go for physical inspection, as to whether the information is wrong or right that he or she is written on the application form. If all the information is correct then the credit committee sanctions the loan under this scheme. But if the loan amount exceeds the loan then the credit committee sends the necessary documents and information to

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

25

the Consumer Credit Division, at the Head Office of the bank. Then the credit division

decides that the will be sanctioned or not.

The sanctioning mechanism is shown in the following diagram:

Customer → CCS in-charge→ Credit Committee→ Head Office (if branch credit limit exceeds)

6.3 Credit Disbursement After the credit proposal has been approved, the credit officers of Retail
6.3 Credit Disbursement
After the credit proposal has been approved, the credit officers of Retail Head Office check
whether all the security components are collected properly. If all requirements are there,
documentation and arrangements are prepared for credit sanction. A sanction advice for every
particular retail credit is sent to the branches for final disbursement. This branch level
disbursement is called “Decentralized Disbursement System”
Branches, after getting the sanction advice, make a signing event with agreed terms and
conditions between bank and individual client. After that, credit is disbursed to the client’s
savings account. The total process requires fifteen, in special cases, twenty days from
receiving client’s application up to disbursement.
Without completion of any of these steps including credit assessment, approval and proper
documentation, no retail credit will be disbursed .The total process started from application
received at branch level up to credit disbursement can be shown in a diagram which is common
for all Private Commercial Banks who offer retail credit. This diagram along with the whole
process is approved by Bangladesh Bank in a guideline named” Prudential Regulations for
Consumer Financing, 2004”.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

26

Chart 6.1 Process Flow Chart of Retail Loan Processing of Prime Bank Limited

Credit in Context of Prime Bank Limited 26 Chart 6.1 Process Flow Chart of Retail Loan

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

27

6.4 Follow Up, Monitoring and Supervision

The credit under the scheme is fully supervised and the success of the scheme will depend on the porter and persistent supervision, follow up persuasion and monitoring of the credits by the branches. CCS unit shall monitor and supervise the CCS loan portfolio of all the branches.

Branches shall maintain proper records of the applicants received, loans sanctioned, disbursed and recovery made thereon. Branches shall send the statements of CCS loan and the overdue list to the CCS Unit within the first week of every month. The CCS unit shall properly utilize the MIS (Management Information System) available in the existing computer program for consumer Credit Scheme of the bank to closely monitor and supervise the scheme.

6.5 Steps Taken In Case Of Default Installment Before disbursement of loan, the customer will
6.5 Steps Taken In Case Of Default Installment
Before disbursement of loan, the customer will deposit crossed cheque covering the total
number of monthly installments in favor of the bank which will have to be presented for
collection of the due dates. Installments will be paid then within 7th day of each month. If
one installment is not paid then it has become overdue. Actions are taken on the basis of
default installment.
Steps taken are described below:

If one month installment is due then concerned officer will call a phone to the client. In case of installment due for two months letter is given to the client and pho ne is also called; In case of three months phone and letter to client as well as visit is done; If installment is not given within four months then letter is given to the guarantor; If installment is not given within five months then legal notice is send to the client;

In spite of all these steps if installment is not given then case is sued against the client.within five months then legal notice is send to the client; In case of installment due

In case of installment due for six months the loan is treated as classified loan.is send to the client; In spite of all these steps if installment is not given

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

28

7.0 PORTFOLIO OF RETAIL CREDIT DISBURSED

7.1 Retail Credit Portfolio

Table 7.1: Contribution to Total Credit of PBL

(Taka in Crore)

PARTICULARS 2009 2008 2007 Total Credit 8866 7057 5381 Total Retail Credit 662 451 274
PARTICULARS
2009
2008
2007
Total Credit
8866
7057
5381
Total Retail Credit
662
451
274
Contribution to Total Credit
7.46%
6.39%
5.09%
Total Credit
Total Retail Credit
10000
8866
9000
8000
7057
7000
6000
5381
5000
4000
3000
2000
662
1000
451
274
0
2007
2008
2009
Chart 7.1: Retail Credit Disbursement of PBL
Findings
Taka in Crore
Retail Credit Disbursement of PBL Findings Taka in Crore From the annual reports of PBL, some

From the annual reports of PBL, some facts and figures are found regarding retail credit. According to these annual reports, in 2007, the total amount of credit disbursed was Tk. 5381 Cr. in which consumer credit counted with a 5.09% of that amount. In 2008, the credit portfolio was maintained by PBL of Tk 7057 Cr. in which, consumer credit scheme (CCS) accounted for only 6.39% of total credit disbursed in different sectors.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

29

In 2009, though 7.4% of total credit was invested in terms of retail credit, PBLon Retail Credit in Context of Prime Bank Limited 29 continued its spotlight on retail credit.

continued its spotlight on retail credit. In view of the growth potentials, separate

division was created at the beginning of the year 2009 for managing the retail

business following credit portfolio was standing with PBL with different lending

sectors.

7.2 Growth Rate

Table 7.2: Growth Rate of PBL in last 3 years (Taka in Crore) Particulars 2009
Table 7.2: Growth Rate of PBL in last 3 years
(Taka in Crore)
Particulars
2009
2008
2007
2006
Total Retail Credit
662
451
274
200
Growth Rate
46.78%
64.59%
37%
Growth Rate
80%
64.59%
60%
46.78%
40%
37%
20%
0%
2007
2008
2009
Chart 7.2: Growth Rate of Retail Credit of PBL in last 3 years
Findings

In 2007 total disbursement was 274 crore which increased from 200crore, the growth rate was 37%.

In 2008 total disbursement was 451 crore which increased from 274crore, the growth rate was 64.59%. In this year, a number of products were developed and existing products were re-launched with better pricing structure and repayment period. And the made their sales team very effective and provide huge investment on advertisement.which increased from 200crore, the growth rate was 37%. In 2009 total disbursement was 662 crore

In 2009 total disbursement was 662 crore which increased from 451 crore, the growth rate was 46.78%.structure and repayment period. And the made their sales team very effective and provide huge investment

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

30

7.3 Income Generation by Retail Credit

Table 7.3: Total Credit Disbursement of PBL in term of interest income (Taka in Crore)

Particulars 2009 2008 2007 Interest Income from Total Credit 1085 909 717 Interest Income from
Particulars
2009
2008
2007
Interest Income from Total Credit
1085
909
717
Interest Income from Retail Credit
83
52
25
Contribution in Retail Credit
7.65%
5.57%
3.48%
Interest Income from Total Credit
Interest Income from Retail Credit
1400
1200
83
1000
52
800
25
600
1085
909
400
717
200
0
2007
2008
2009
Chart 7.3: Credit Disbursement of PBL in last 3 years
Findings:
Taka in Crore
of PBL in last 3 years Findings: Taka in Crore As per the above percentages of

As per the above percentages of retail credit or Consumer Credit Scheme (CCS) in total credit portfolio, the main income that this sector generates it the interest income. In 2007, the total interest revenue generated by different credit sectors was Tk 717 Cr. in which, CCS alone was responsible for income of Tk. 25 Cr. 3.84% income is generated in 2007 Again, in 2008, the total interest revenue from different sector was Tk. 909 Cr. wherein, Tk. 52 Cr. was gained by CCS. 5.57% income is generated in 2008 though in 2008 disbursement growth was highest. In the year 2009, total interest revenue earned was Tk.1085 Cr. and Tk. 83 Cr. was from CCS. 7.65% income is generated in 2009. Growth rate was not more than previous year in 2009 but income generation rate was highest.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

31

8.0

RECOVERY%

COMPARISON

BETWEEN

PBL’S

CCS

DISBURSEMENT

AND

8.1 Year Wise Disbursement Amount and Recovery Percentage of

CCS Loans of Prime Bank Limited: (Last 5 years)

Table 8.1: Retail Credit Disbursement of PBL

(Taka in Crore) Year Total Disbursement Amount Recovery % 2005 182 93.02% 2006 219 95.75%
(Taka in Crore)
Year
Total Disbursement Amount
Recovery %
2005
182
93.02%
2006
219
95.75%
2007
274
96.55%
2008
451
95.80%
2009
662
97.30%
Disbursment Amount
662
700
600
500
451
400
274
300
219
182
200
100
0
2005
2006
2007
2008
2009
Chart 8.1: Retail Credit Disbursement of PBL in last Five years
Findings:
From the graph above we can see that the trend of the disbursement amount of CCS
Loan is increasing year to year. This indicates the healthier position of the Bank in the
commercial market.
Taka in Crore

In 2008, the disbursement is increased much more than the previous year at a highest rate (64.59%) in last five years, because of the very effective sales team and huge advertisement campaign.of the Bank in the commercial market. Taka in Crore And in 2009 the disbursement amount

And in 2009 the disbursement amount was increased in a highest amount.at a highest rate (64.59%) in last five years, because of the very effective sales team

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

32

Recovery %

98.00% 97.30% 97.00% 96.55% 95.75% 95.80% 96.00% 95.00% 94.00% 93.02% 93.00% 92.00% 91.00% 90.00% 2005
98.00%
97.30%
97.00%
96.55%
95.75%
95.80%
96.00%
95.00%
94.00%
93.02%
93.00%
92.00%
91.00%
90.00%
2005
2006
2007
2008
2009
Chart 8.2: Retail Credit Recovery of PBL in last 5 years
Findings:
From the above graph we can see that the trend of the recovery% of CCS Loan is
increasing in 2005-2007. This at a first glance indicates the good position of the Bank
in the commercial market.
But in 2008 recovery% was fall. It is because in 2008, PBL changed their retail credit
policy which attracts more customers. So in 2008 the growth of disbursement was
increased vey much that is 64.59%. PBL disbursed huge loan but they could not
recover well. 2008 PBL faced a problem in recovery percentage because they apply
new procedure of loan disbursement. This affected in their recovery rate because of
lack of attention in this sector. But in 2009 they overcome this problem nicely.
In 2009 the disbursement amount of PBL was increasing at a good amount as well as
they recovery % was also satisfactory.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

33

9.0 COMPARATIVE ANALYSIS WITH OTHER BANKS

For the comparative Analysis of Prime Bank Limited (PBL) with the other Commercial Bank

I have chose four other Banks. They are:

1. Dhaka Bank (DBL)

2. BRAC Bank

3. Hong Kong and Shanghai Banking Corporation (HSBC) 4. Standard Chartered Bank Limited (SCB) 9.1
3. Hong Kong and Shanghai Banking Corporation (HSBC)
4. Standard Chartered Bank Limited (SCB)
9.1 The Disbursement Amount and Recovery% of five Different
Bank including Prime Bank Limited (PBL) at Year 2007:
Table 9.1: The Disbursement Amount and Recovery% in 2007
(Taka in Crore)
Diff. Bank
PBL
DBL
BRAC
HSBC
SCB
Disbursement amount
274
210
370
355
300
Recovery %
96.55%
96.00%
98.75%
97.50%
97%
Disbursement Amount
400
370
355
350
300
300
274
250
210
200
150
100
50
0
Tk in Crore

PBL

DBL

BRAC

HSBC

SCB

Chart 9.1: Retail Credit Disbursement of Five Banks in 2007

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

34

Recovery %

98.75% 99.00% 98.50% 98.00% 97.50% 97.50% 97% 97.00% 96.55% 96.50% 96.00% 96.00% 95.50% 95.00% 94.50%
98.75%
99.00%
98.50%
98.00%
97.50%
97.50%
97%
97.00%
96.55%
96.50%
96.00%
96.00%
95.50%
95.00%
94.50%
PBL
DBL
BRAC
HSBC
SCB
Chart 9.2: Recovery % of five Banks in 2007
Findings
The total disbursement amount of PBL & DBL is Low. Because they have started
their CCS from after the others.
At 2007, the highest amount of disbursement was done by HSBC and Medium
amount of disbursement was done by BRAC and SCB. BRAC has introduced
Consumer Credit Scheme in a new way. They promote their different scheme in news
paper TV media etc. This reflects in their disbursement.
Recovery % of BRAC, SCB and HSBC is good. But comparatively DBL and PBL
was not good.
So, in 2007 the performance of PBL was not satisfactory from the point of
disbursement as well as recovery
9.2 The Disbursement Amount and Recovery% of five Different
Bank including Prime Bank Limited (PBL) at Year 2008:
Table 9.2: The Disbursement Amount and Recovery% 2008
(Taka in Crore)
 

PBL

DBL

BRAC

HSBC

SCB

Disbursement amount

451

330

490

440

410

Recovery %

96.10%

95.50%

99.5%

98.20%

97.5%

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

35

Disbursement Amount

600 490 500 451 440 410 400 330 300 200 100 0 PBL DBL BRAC
600
490
500
451
440
410
400
330
300
200
100
0
PBL
DBL
BRAC
HSBC
SCB
Chart 9.3: Retail Credit Disbursement of Five Banks in 2008
Recovery %
100.00%
99.50%
99.00%
98.20%
98.00%
97.50%
97.00%
96.10%
96.00%
95.50%
95.00%
94.00%
93.00%
PBL
DBL
BRAC
HSBC
SCB
Chart 9.4: Recovery % of five Banks in 2008
Findings
At 2008, the highest amount of disbursement was done by BRAC and lowest amount
of disbursement was done by DBL. HSBC is not very far from BRAC.
Tk in Crore

Recovery % of BRAC is the Best and SCB & HSBC is good. But comparatively DBL and PBL is not good.done by DBL. HSBC is not very far from BRAC. Tk in Crore In 2008 PBL’s

In 2008 PBL’s disbursement was increased much more than previous year. And PBL come to a strong position than previous year. But they did not focused on recovery come to a strong position than previous year. But they did not focused on recovery so the recovery was reduced in this year

So, in 2008 the performance of PBL was satisfactory in term of disbursementto a strong position than previous year. But they did not focused on recovery so the

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

36

9.3 The Disbursement Amount and Recovery% of five Different Bank including Prime Bank Limited (PBL) at Year 2009:

Table 9.3: The Disbursement Amount and Recovery% in 2009 (Taka in Crore)

Diff. Bank PBL DBL BRAC HSBC SCB Disbursement amount 662 560 620 600 610 Recovery
Diff. Bank
PBL
DBL
BRAC
HSBC
SCB
Disbursement amount
662
560
620
600
610
Recovery %
96.80%
95.50%
99.50%
98%
97.5%
Disbursement Amount
680
662
660
660
640
620
620
610
600
580
560
560
540
520
500
PBL
DBL
BRAC
HSBC
SCB
Chart 9.5: Retail Credit Disbursement of Five Bank in 2009
Taka in Crore

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

37

Recovery %

99.50% 100.00% 99.00% 98% 97.50% 98.00% 96.55% 97.00% 95.50% 96.00% 95.00% 94.00% 93.00% PBL DBL
99.50%
100.00%
99.00%
98%
97.50%
98.00%
96.55%
97.00%
95.50%
96.00%
95.00%
94.00%
93.00%
PBL
DBL
BRAC
HSBC
SCB
Chart 9.6: Retail Credit Recovery% of five Banks in 2009
Findings
At 2009, the highest amount of disbursement was done by PBL and lowest amount of
disbursement was done by DBL. BRAC is as usual in the highest position. HSBC is
not very far from BRAC. SCB is almost as previous year.
It’s also the highest amount disbursed by PBL. In this year PBL gave attention in
recovery sector that’s why their recovery % was increased than the previous year
Recovery % of BRAC is the Best and PBL, SCB and HSBC is good. But
comparatively DBL is not good.
So, in 2009 the performance of PBL was good.
9.4 Overall Findings on Comparative Analysis
Among the five Commercial Banks, BRAC is in the superior position, both in terms
of disbursement amount and recovery % of the CCS Loan. BRAC is in a supiror
position because they started retail credit earlier than the other banks.
PBL and HSBC are almost running in the same speed, both in terms of disbursement
amount and recovery % of the CCS Loan. Their position is very satisfactory in the
Commercial Market. Though PBL’s Recovery% is not satisfactory.
Though DBL had just started their CCS from year 2003, their position is not very
good in comparison to these other banks.
The position of SCB is satisfactory for CCS Loan. Because the trend of both
disbursement amount and recovery % is decreasing each year. So they should
concentrate more in this sector.
So, from the overall scenario we can understand that the position of Consumer Credit
Scheme (CCS) of Prime Bank Limited is enhancing in comparison to the other
Commercial Banks.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

38

10.0 PROBLEMS AND PROSPECTS OF RETAIL CREDIT OPERATION

10.1 Problem

From the above description and comparative analysis with Four other banks, following problems are found in Prime Bank Retail Credit, which is given below:

Less diversified target client segments

PBL currently is allowing retail credit disbursement to a few individuals who are businessmen. Again,
PBL currently is allowing retail credit disbursement to a few individuals who are
businessmen. Again, salaried individuals are getting preference in terms of retail credit.
Though the numbers of fixed income earning people are increasing day by day, there is an
existing large segment of business people of different types in Bangladesh who needs retail
loan frequently rather than salaried individuals. Also, the self-professionals related to the
legal activities and media are not there in the target clients segment. This narrow focus on
target clients is reducing the market share of PBL in retail lending.
Lengthy Assessment Procedure
For the compliance of prudential guidelines of Bangladesh Bank, 2004, PBL asks for CIB
report for an amount of TK. 50,000 and more. As it takes six to seven days for CIB to be
returned back to the branches, almost 15-20 working days are needed by PBL to disburse
retail credit.
Now days, people are too busy to spend longer time for having a smaller amount of loan for
their personal need. For this longer assessment process that is widening the time interval
between a loan application reception and loan disbursement has resulted less number of
clients and has also affected the interest income.
Decentralized Disbursement System

The retail credit disbursement process of Prime Bank is decentralized which is also a barrier for it to take steps for more expansion in retail credit. As the credits sanctioned are disbursed from branch level, most of the employees of credit department in branches are engaged with disbursement related activities in most of the times which hampers the branch activities to attend more clients.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

39

10.2 Prospects

From the above study and competitive analysis on Prime Bank, the prospects that are found are following:

Diversified Product Portfolio

PBL currently has diversified product portfolio. From the above comparison, it can be easily observed that, the other immediate major competitors like HSBC and SCB have only three to four types of product and with these products, they are trying to capture middle-class, upper middle class and upper class people’s personal credit need. But Prime Bank has separate cells for separate client segments which is one of the important aspects of PBL. This is one of the crucial prospects for PBL to proceed with retail credit further.

Lower interest rate and related cost It can be said confidently from the above comparison
Lower interest rate and related cost
It can be said confidently from the above comparison that, PBL has the lowest interest rate in
terms of all retail credit products among its competitors which is an opportunity for it to
attract new clients.
Again, in terms of processing fee, stamp charge and early settlement cost, wherein its other
competitors are taking higher amount and charges for early settlement, PBL charges the
lowest amount and allows its client for early settlement at free of cost, which is convenient
for clients.
Lower credit amount and credit cycle

In some retail products, PBL offers different lowest amount and time interval as a minimum which is also a convenience for the clients of a developing country like Bangladesh. In Bangladesh, most of the fixed income earning people have income range within Tk. 20,000- 35,000.For them to avail an amount of retail credit for more than Tk. 10,000-12,000 to fulfill personal needs is almost impossible. Lower tenor of credit lessens the burden from clients and inspires them to take more credit which is currently offered by PBL.

Protection against defaulter

As PBL asks for CIB for any amount of TK. 50,000 and above, it protects PBL of holding default clients and secures the income generated by retail credit.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

11.0 RECOMMENDATIONS

40

There are some charges for the loan disbursement like Risk fund that should be reduced & definitely refundable after the repayment of the installments. Rate of interest should be reduced. Instead of 2 peoples security 3 people security would
Rate of interest should be reduced. refundable after the repayment of the installments. Instead of 2 peoples security 3 people security would
Instead of 2 peoples security 3 people security would more secured the loan recovery. of the installments. Rate of interest should be reduced. There should be special incentives for those
There should be special incentives for those of the regular payer. Loan disbursement procedure should be within 2 day after the application of the CCS. Recovery of the loan by the monthly installment should be done through the automated adjusted installment software by the banks. Interest rate differential should be there to encourage a group of people. The equal monthly installment chart should be enrolled to the brochure according to the various loan amounts. Individually every branch should be provided a target for selling the CCS loan & the top most sellers would be rewarded by the monetary benefits that would encourage the employers. Workshop on CCS loan should be arranged for initiating new ideas between the concerned officer & Retail credit division to initiate new concepts & ideas to compete with other banks. At least 2 loans fair should be arranged to sell the large amount of loans & the special waiver should be offered at that time. Various festivals loan (Eid, Puja) should be provided for the different people. During the period of festival loans loan-processing fees should be nil & interest rate waiver should be offered to sell the large amount. Proper communication through the publicity should be there to encourage all kind of CCS facilities. Total marketing team should be prompt enough to initiate the large number of customers every month.Rate of interest should be reduced. Instead of 2 peoples security 3 people security would more

of CCS facilities. Total marketing team should be prompt enough to initiate the large number of

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

12.0 CONCLUSION

41

Bank is a functional institution that relates to money matter. For a country, it keeps an important factor. As an intermediary between the supplier and demand, Prime Bank Ltd. plays a deep role.

From the aforesaid topic & my point of origin to work in Prime Bank Limited, I can say that I really enjoyed my OCP period at Prime Bank Limited, Laldighi East Branch’s General Banking Department, Retail Credit Department, Foreign Exchange Department form the very first day. I am confident that this OCP program at Prime Bank Limited, Laldighi East Branch, Chittagong will definitely help me to realize my further career in the job market. “A COMPARATIVE ANALYSIS ON PRIME BANK RETAIL CREDIT” is not so sufficient to measure and express perfectly within this short time of my OCP period. But it is a great opportunity for me to get use to with the operational environment of micro credit of Prime Bank Limited. I have tried my soul to incorporate the research report with necessary relevant information in my OCP report. Though there are some lacking in the operational activities of CCS loan facilities but overall performance of consumer credit scheme are formidable to fight with other private sector banks.

To ensure promising future it should develop its wide areas to socio-economic development of the
To ensure promising future it should develop its wide areas to socio-economic development
of the society. We pray and hope that Prime Bank Limited will provide various kinds of
service and schemes to welfare of the society.

Comparative Analysis on Retail Credit in Context of Prime Bank Limited

13.0 REFERENCES

42

Bangladesh Bank (2004).Prudential Regulations for Consumer Financing. Clark, T., Dick, A., Hirtle, B., Stiroh, K., & Williams, R.(2007).The Role of retail in
Clark, T., Dick, A., Hirtle, B., Stiroh, K., & Williams, R.(2007).The Role of retail in U.S Banking Industry.Journal of Econmic Policy Review, 1-18. Bank (2004).Prudential Regulations for Consumer Financing. Gopinath, S. (2005, May).Retail Banking-Opportunities and
Gopinath, S. (2005, May).Retail Banking-Opportunities and Challenges. Paper presented at the IBA-banking Frontier International Conference, Mumbai, India. Math, B. (2005, December).Future Growth Drivers-Retail versus Corporate. Papers presented at a seminar at MDI, India. Ministry of Finance. (2006).The Activities of Banks and Financial Institutions, 2005- 2006. Publication No. 329 EX-1400, Dhaka, Bangladesh Government Press. Stiroh, J.(2004).Diversification in Banking. Journal of Money, Credit and Banking, 39(1), 49-81. Westerfield, R.B. (1998) Effect of Consumer Credit on the Business Cycle. Journals of the American Academy of Political and Social Science, 196, 99-110.Stiroh, K., & Williams, R.(2007).The Role of retail in U.S Banking Industry.Journal of Econmic Policy Review,

of Consumer Credit on the Business Cycle. Journals of the American Academy of Political and Social