Introduction

1.1 Background of the Report Commercial Banks are one of the key contributors to the economy of Bangladesh. The process of economic development requires the banking sector to operate efficiently and allocate the capital resources to the proper development agencies. People and the government itself are very much dependent on the services provided by these banks in the financial market for the process of economic development to function properly. Commercial banks act as financial intermediaries by performing the function of mobilization the funds from one group and lending the same to another while making a reasonable amount of profit after meeting the cost of funding. Lending is said to be the primary function of a banker and through this function he earns income for the bank by charging interest on the extended credit facility (in the form of loans and advances) to the clients. There are various types of loans and advances through which the bank exercises the function of lending. Modern Banking system plays a vital role for a nations economic development. Over the last few years the Banking world has been undergoing a lot of change due to deregulation, technological innovations, globalization etc. These changes also made revolutionary changes of a countrys economy. Present world is changing rapidly to face the challenge of competitive free market economy. It is well recognized that there is an urgent need for better-qualified management and better-trained staff in the dynamic global financial market. Bangladesh is no excepting of this trend. Banking sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future. Money and Banking is the center around which all-economic science clusters. So this report is carried on to find out the problems faced by Eastern Bank and recommend some measures to overcome these problems for economic development of Bangladesh. 1

About EBL: Eastern Bank Limited (EBL) is one of the modern, fully online and technologically superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of depository, loan & card products. These products include different types of Savings & Current Accounts, Personal Loans, Auto Loan, Debit Card, Pre-paid Cards, Internet Banking, Treasury, Syndication, Corporate Banking and SME Banking services through a network of branches & centers countrywide. Eastern Bank has its presence in major cities/towns of the country including Dhaka, Chittagong, Sylhet, Khulna and Rajshahi. Tracing its origin back to 1992, EBL is serving the individual and corporate clientele alike with remarkable success offering innovative banking services since then.

1.2 Objectives of the Report:

There had been some objectives set forward in doing this report so that it can be determined what task I have to perform in the bank. The objectives of the report are divided into two partsBroad Objective:

To identify Consumer Loan classification, Provisioning Requirement & Recovery

Strategies of Eastern Bank Ltd. Specific Objective: To understand the gap between banking theory and practice. To identify the consumer loan sanction process of EBL. To evaluate how information technology in modern business help bankers to manage their activities.

1.3 Topic of the Report To write a report is necessary to select a topic. A well defined topic reflects what is going on to be discussed through out the report. The topic that has been assigned by supervisor is Consumer Loan classification, Provisioning Requirement & Recovery Strategies of Eastern Bank Ltd. The report has discussed how the bank operates their activities with their regular customers

1.4 Methodology of the Report:

Source: Information provided on this report is of two types. One is primary source and the next
one is secondary source. In fact, most of the information has collected from primary sources.

Primary Sources:
1. Interview with the EBL employees. 2. Day-to-day conversation and discussion with the credit analysts. 3. MIS officers.

Moreover, I have maintained a close contact with the direct sales team members of Eastern Bank Ltd. who regularly visit clients and consult with prospective customers.

Secondary Sources:
1. Eastern Bank Limited Annual Reports 2007

2. Product Program Guide [PPG] 3. Credit Assessment Guideline

4. Loan files of the client.

5. Websites and so on.

Data Collection Method:

The process of financial data collection is not hassle free for any outsiders. As I worked there for three months, they have allowed me to collect data from MIS of CFC. Some times, they have provided data verbally and I took note of that.

1.5 Scope of the Study:

This report has prepared to gain a clear view of the consumer loan management process. It includes all my experience in CFC. I tried to show how EBL handles all the activities necessary to disburse loans to its clients. But there are some policy issues like which loan needs to be reviewed, what should be the interest rates, how many documents should be made compulsory for security reasons, who will be liable for the default loan, how responsibility will be delegated to officials and so on. These issues have not addressed in this report as my goal was to reveal how work is done not how it should be done.

1.6 Limitations of the Study:

Actually, the truth is that, the limitations of this report are well concrete. They have stated below

Time:
It was one of the major limitations of this report. Nevertheless, according to PARKINSONS Law: Works tend to expand to fill the time available. The subject matter of this report was so vast that despite of the time given, I have not included all the aspects of consumer loan as I expected earlier. However, I tried my best to present this report before the submission deadline.

Inadequate Discussion:
As a newcomer to banking service, I have taken considerable time to understand this business. To make a solid report I felt the urgency of communication with high-level employees but there is no opportunity to make appointments with them. I think inadequate discussion is one of the limitations of the report.

Restricted Disclosure:
The report will be very information worthy if I get the opportunity to make a comparative analysis of consumer loan. Nevertheless, the fact is, most of the banks do not disclose consumer loan data in a separate heading in the annual report. Moreover, trend analysis of EBL consumers loan also lacks the historical data necessary to make a valid forecast. Most of the loans have launched in recent times.

Lack of knowledge and experience:

Honestly, I agree that making a comprehensive study on consumers loan requires a great deal of experience and current banking knowledge. As an M.B.A student, I do not possess that kind of knowledge and experience.

Literature Review

2.1 Consumer Loan:

EBL Consumer Loan has aimed at solving our personal financial needs. Its flexible nature allow customer to improve their home, office, and life style. Their Consumer loan Scheme will allow to avail credit up to 75% of the price of the item they want to buy. As a loan customer, we get to use our online banking services as well. The maximum repayment period for EBL Consumer Loan is 3 years. Customers can choose 12, 24, or 36 equated monthly installments (EMI) to repay the loan. Their interest rates are competitive in the market.

Now a day, education is not just limited to books and classrooms. In todays world, education is to understand the real world and applying knowledge for the betterment of the society as well as business. From the education, theoretical knowledge is obtained from a course of study, which is only the half way of the subject matter. Practical knowledge has no alternative. The perfect coordination between theory and practice is of paramount importance in the context of the modern business world in order to resolve the dichotomy between these two areas.

2.2 Loan for Professionals:

EBL Loan for Professionals is meant for the development of our professional life. With a little financial help under EBL's Loan for Professionals Scheme, we can add value to your profession.

If anyone is a self-employed Doctor, Engineer, Architect, Lawyer, Computer Professional or a Chartered Account, they can buy or import equipment, tools, customized products for use in your chamber. The purchase of the item is expected to directly contribute to the advancement of their professional/ business solution They need to be a Bangladeshi national between the ages of 25-60 working in the abovementioned field for at least five years.

Organizational Features:
3.1 Organization Orientation 3.1.1 Formation:
In pursuance of the Bank of Credit and Commerce International (Overseas) Limited in Bangladesh (Reconstruction) Scheme, 1992, framed by the Bangladesh Bank and approved by the Government of Bangladesh, the Eastern Bank Limited was formed as a public limited company incorporated in Bangladesh with primary objective to carry on all kinds of banking business in and outside Bangladesh. Eastern Bank Limited had also taken over the business, assets, and liabilities of erstwhile Bank of Credit and Commerce International (Overseas) Limited branches in Bangladesh with effect from 16h August 1992. Now EBL is a second-generation commercial bank with 25 online branches across major cities in Bangladesh a 612 full time employees on year end 2006. It offers full range of commercial banking products and services to the corporate, mid-market and

retail segment. Besides main operation, EBL has an Offshore Banking Unit (OBU) setup in 2004, which gives loans, and takes deposits only in freely convertible foreign currency to and from resident son/institutions, foreign owned EPZ companies etc.

30,000 25,000 20,000 15,000 10,000 5,000 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Tk Year

Fig: 1 Loan Deposit

3.1.2 Banking Industry Scenario:

Loan Deposit Growth & NPL: As per BB statistics, commercial banks operating in

Bangladesh disbursed an accumulated amount of BDT 1,28.8 billions on year end 2006 against BDT 1,292.51 billion year end 2005(growth 18.26). Whereas non-performing loans as on year end, 2006 stood at BDT 200.98 billion or 13.15 percent of total loans as against BDT 175.09 billion or 13.55 per cent of total loans on year end 2005.this better NPL scenario was mainly attributable to write off of around BDT 110 billion bad loans till the end of September 2006 among which state owned enterprises wrote more than half of bad debts off. Besides, in the first half of FY 07, overall domestic credit rises by 9.62 percent over same period of FY 06mainly due to increased borrowing by Govt in the

Back drop of shortfall in revenue collection. Private sector credit grew by 12.15 percent in first half Y 07 compared to same period FY 06. in response to the rise in policy rates, the commercial banks lending rates increased from 1.3percent to 12.4 percent and deposit rates from 5.9 percent to 7 percent from December 2005 to September 2006. Deposit, on the other hand, stood at BDT 1,76182billion as n December 31, 2006 registering around 20 percent growth.

Calculation of Provision for Loans and Advances as per CL December 2006:

Nature Outstanding Interest Suspense Eligible Security Base for Provision Required Capital

Standard SMA SS DF BL Staff Loan Total

24392,209,377

N/A N/A 14,330,705 1,521,539 83,076,909 N/A 98,929152

N/A N/A 20,424,000 10,889,004 33,819,566 N/A 371,132,570

24,392,291,144 407,371,915 205,338,987 5,342,991 305,017,524 N/A 25,315,362,561

371,003,511

437,053,469 240,093,692 1,753,533 727,913,998 154,053,220

25,969,077,288

20368,596 41,067,797 2,671,495

305,017,524

N/A
740,128,923

Table: 1

3.1.3 Vision of EBL:

To become the bank of choice by transforming the way we do business and developing a truly unique financial institution that delivers superior growth and financial performance and be the most recognizable brand in the financial services in Bangladesh. EBL dreams to become the bank of choice of the public including both the consumer and the corporate clients. It has adopted a new logo that looks very dynamic in its attractive colors that reflect all the changes that are taking place in EBL.

3.1.4 Mission of EBL:

We will deliver service excellence to all our customers, both internal and external. We will constantly change our systems, procedures, and training to maintain a cohesive and professional team in order to achieve service excellence. We will create an enabling environment and embrace a teambased culture where people will excel. We will ensure to maximize shareholder's value.

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Particulars
Authorized Capital Paid-up Capital Reserve Deposit & Other Accounts Loans & Advances Export Import Guarantee Business Operating Income Operating Expenses Operating Profit Net Profit Before Tax Total Assets (excluding contingent)

2002
1,000 720 2,448 13,661 10,891 4,358 12,642 1,183 1,986 1,255 731 631 18,445

2003
1,000 828 2,560 11,952 11,288 3,533 16,256 354 1,985 1,226 759 638 18,716

2004
1,000 828 2,733 15,649 14,973 8,303 24,414 947 2,241 1,349 892 851 23,048

2005
3,300 828 3,132 19,396 17,758 13,239 29,692 555 2,957 1,901 1,056 967 27,400

2006
3,300 828 3,146 25,734 26,008 24,286 39,347 651 4,272 2,913 1,358 1,134 35,971

(Above figures are in million BDT)

Table: 2 EBL at a Glance (2002 - 2006)

(Continued)

Particulars
Book Value per share (Taka) Market value per share (Taka) Earning per share (Taka) Dividend per share (Taka) Return on Equity (Average) Return on Assets (Average) Classified loan as % of total Loans Capital Adequacy Ratio Cost-Income Ratio Net Interest Margin RWA to Total Asset Number of Branches

2002
295.29 303 51.49 35 17.44% 2.04% 13.46% 22.32% 27.91% 3.49% 54.10% 22 484

2003
281.87 382 43.21 20 15.33% 1.94% 13.61% 18.27%28.1 7% 2.47% 71.36% 22 495

2004
317.73 780 58.38 43 18.44% 2.32% 7.191% 14.82% 30.93% 3.26% 81.70% 22 522

2005
370.93 1,222.75 66.00 40 19.17% 2.17% 5.41% 18.76% 33.66% 2.81% 61.68% 22 536

2006
400.38 792.50 61.98 45 16.07% 1.62% 3.79% 14.02% 35.67% 2.11% 71.50% 25 612

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Eastern Bank Limited

HIGHLIGHTS ON THE OVERALL ACTIVITIES

For The Year Ended 2006 Sl No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Particulars
Paid up capital Total capital Surplus/shortage capital Total asset Total deposits Total loans and advances Total contingent liabilities Loans and deposits ratio % of classified loans against total loans & advances Profit after tax and provisions Classified loans for the year Provisions held against classified loans Surplus of provision Cost of fund Interest bearing assets Non-interest bearing assets Return on assets Income from investments Earning per share Revenue per share Price earning ratio Taka Taka Taka Taka Taka Taka Taka % % Taka Taka Taka Taka % Taka Taka % Taka Taka Taka Times Table: 3

2006
8,28,000,000 3,60522,984 1,290,853,726 35,970,642,294 25,734,345,791 26,007,863,928 15,328,682,087 101.06 3.79 513,197,847 985,761,224 785,590,886 45,123,137 8.26 32,751,377,868 3,219,264,425 1.62 459,180,077 61.98 254.92 12.79

2005
828,000,000 3,170,316,847 1,649,263,507 27,399,954,46 9 17,980,705,94 8 17,757,598,56 6 13,400,989,90 8 98.76 5.41 546,496,236 960,901,893 657,471,853 423,549 6.68 23,508,370,10 6 3,891,584,363 2.17 311,352,228 66.00 192.19 18.53

12

3.1.5 Management Hierarchy:

CHAIRMAN BOARD OF DIRECTORS MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER DEPUTY MANAGING DIRECTOR & CHIEF OPEARATING OFFICER SENIOR EXECUTIVE VICE PRESIDENT (SEVP) EXECUTIVE VICE PRESIDENT (EVP) SENIOR VICE PRESIDENT (SVP) VICE PRESIDENT (VP) SENIOR ASSISTANT VICE PRESIDENT (SAVP) FIRST ASSISTANT VICE PRESIDENT (FAVP) ASSISTANT VICE PRESIDENT (AVP) SENIOR PRINCIPAL OFFICER (SPO) PRINCIPAL OFFICER (PO) SENIOR OFFICER (SO) OFFICER ASSISTAT OFFIER (AO) TRINIG ASSISTANT OFFICER (TAO)

13

3.1.6 Provision for Loans and Advances

(a) Specific provision against Loans & Advances

2006
Opening balance Fully provided debt written off ring the year Recovery of amount previously written off Specific provision for the year Provision held a the end of the year Taka 464,083,380 (95,589,051) _ 25,385,627 (70,203,424) 393,879,956

2005
Taka 493,678,297 (62,783,756) _ 33,188,839 (29,594,917) 464,083,380

(b) General provision against unclassified Loans & Advance:

2006
Opening balance Provision made during the year Taka 193,388,473 197,983,631

2005
Taka 138,151,570 55,236,903

Total (a)+(b)

391,372,104 785,252,060
Table: 4

193,388,473 657,471,853

14

Findings

Consumer Loans of EASTERN BANK LIMITED

Unsecured Loans:

1
JIBAN DHARA LOAN

2
UTSHAB LOAN

3
EXECUTIVE LOAN

4
CAR LOAN

5
DEBIT LINE

Secured Loans:

6
FAST LOAN

7
FAST CASH

15

EBL Jiban Dhara loan is any purpose unsecured and terminating loan facility (EMI based) for any legitimate purpose. Bank would finance against gross monthly income of the any credit worthy individual. To meet lifestyle needs of the creditworthy individuals and to capitalize JIBAN DHARA the vast market gap; Jiban Dhara Loan is suitable unsecured consumer loan product. LOAN

4.1 Description and features:

EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows: - House renovation - Interior Decoration - Marriages in the family - Advance rental payments - Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances - Purchase of professional equipment like X-ray machine, medical beds, ultra-sonogram machine, engineering/ mechanical tools - Other legitimate purpose. This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation. All EBL branches subject to CPV being in place Any credit worthy individuals like: - Salaried executives - Doctors, Architects, Engineers, Chartered Accountant, Consultant and IT professionals - Businessperson - Lawyer - Journalists of reasonably lower rank - Defense official below Lt. Colonel level

Purpose

Purposes not allowed Availability

Target customers

Non target customers Loan Amount

Minimum TK. 50,000/-

16

(minimum and maximum) for A category customers

Maximum TK. 10, 00,000/- or 12 times of gross monthly income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on. 16% p.a. (Interest rates can be changed by Authority from time to time based on market situation - 1% of the loan amount. 12 to 60 months (As per clients will, affordability and our credit assessment criteria) Credit to the customers deposit account with us. System will be auto debit installment from customers CASA account. Allowed after 6 month. At least minimum 30% of the loan outstanding has to pay by customer while making advance/prepayments amount. Early full and final settlement is flat 1% of the outstanding loan amount. Penal interest of 3% p.a. on dues amount.

Interest Rate Processing Fee Repayment Tenor Disbursement Repayment Advance /Partial pre payment Early payment fee Installment failure charge Stamp charge Top-ups

Personal Guarantee

All relevant stamp charges will be on borrowers account and will be debited from the account at the time of disbursement - Customer can avail more than 1 loan from EBL if income and DBR supports [Separate new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account] - 1 Personal Guarantee will be required for EBL Jiban Dhara Loan. - A guarantor can provide personal guarantee once only for any EBL consumer loan. Eligibility of guarantor: - Any salaried executive deemed acceptable to EBL or - Professionals (Doctors, Chartered Accountants, and Engineers etc) or - Reputed Businessman acceptable to EBL Identification Document of guarantor: - TIN - Photograph or business card

17

Waiver of Guarantee for Priority Organizations Employees Good Boy/Good Girl Note

No personal guarantee would be required for the salaried executives of EBL priority organization list that will mainly comprise the MNCs, Banks, and large local corporate House. Good Boy/Good Girl Note will be required for all EBL Jiban Dhara Loan. EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows: - House renovation - Interior Decoration - Marriages in the family - Advance rental payments - Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances - Purchase of professional equipment like X-ray machine, medical beds, ultra-sonogram machine, engineering/ mechanical tools - Other legitimate purpose. This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation. All EBL branches subject to CPV being in place Any credit worthy individuals like: - Salaried executives - Doctors, Architects, Engineers, Chartered Accountant, Consultant and IT professionals - Businessperson - Lawyer - Journalists of reasonably lower rank - Defense official below Lt. Colonel level Minimum TK. 50,000/Maximum TK. 10, 00,000/- or 12 times of gross monthly income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.

Purpose

Purposes not allowed

Availability

Target customers

Non target customers Loan Amount (minimum and maximum) for A category customers

18

2
UTSHAB LOAN

EBL Utshab loan is any purpose unsecured and terminating loan facility (EMI based) for credit worthy individuals to meet the expenses on the Eve of Holy Eid, Christmas and other festivals. Bank would finance against gross monthly income of the any credit worthy individual. To meet life style needs of the credit worthy individuals and to capitalize the vast market gap, this loan is a suitable unsecured consumer loan product.

4.2 Description and Features:

Purpose

EBL Utsheb Loan is any purpose Lifestyle loan that will support customer Eid related financial needs. Purpose might be considered as follows: - Eid Shopping - Purchase of miscellaneous household appliances like TV, Fridge or Home Theater - Travel in abroad - Purchase of personal computers - Purchase of audio-video equipment - Purchase of furniture during Eid time

Purposes not allowed

This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase.

Availability

All EBL branches subject to CPV being in place

Target customers

Any credit worthy individuals like: - Salaried executives - Doctors, Architects, Engineers, Consultant and IT professionals - Businessperson

Chartered

Accountants,

19

Non target customers

Lawyer Journalists of reasonably lower rank Defense official below Lt. Colonel level

Loan Amount (minimum and maximum)

Minimum TK. 50,000/Maximum TK. 1,50,000/- or 10 times of gross monthly income, whichever is lower. And DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.

Interest Rate

15% p.a.

Processing Fee

Nil

Repayment tenor Loan Availability Disbursement Repayment

12,24 or 36 months

From the time of launch in First week of September 2005.

Credit to the customers deposit account with us. System will be auto debit installment from customers CASA account. Allowed after 6 month. At least minimum 30% of the loan outstanding to be paid by customer while making advance/prepayments amount. Fee: 1% of the partial payment amount.

Advance /Partial pre payment

Early payment fee

Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.

Installment failure charge

Penal interest of 3% p.a. on the dues amount.

20

Stamp charge

All relevant stamp charges will be on borrowers account and will be debited from the account at the time of disbursement

Top-ups Customer can avail more than 1 loan from EBL if income and DBR supports [Separate, new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account]

Personal Guarantee

1 Personal Guarantee will be required for EBL Utshab Loan for general customers including businessmen and employees of the companies not included in the EBL Priority Organization List - A guarantor can provide personal guarantee once only for any EBL consumer loan. Eligibility of guarantor: - Any salaried executive deemed acceptable to EBL or - Professionals (Doctors, Chartered Accountants, and Engineers etc) or - Reputed Businessman acceptable to EBL Identification Document of guarantor: - TIN - Photograph or business card

Waiver of Guarantee for Priority Organizations Employees Good Boy/Good Girl Note

No personal guarantee would be required for the salaried executives of EBL Priority Organization List (POL) that will mainly comprise the MNCs, Banks and large local corporate House.

A satisfactory Good Boy/Good Girl Note will be required for all EBL Utshab Loan.

3
EXECUTIVELO AN

Many Private Banks have introduced unsecured personal loan in the market with varying degree of success. Considering the market trend for consumers Loans, EBL has launched an unsecured personal loan products EBL executive loan targeting salari-ed executive only. It was the first consumer loan among the four other loans. EBL laun-ched this product in Aught, 2004. It is an All Purpose loan aimed to meet the short- term financial needs of an upper income groups of salaried executives.

21

There are three (3) categories: Category A:

Individuals, who maintain or will open a salary account with EBL and will arrange for irrevocable letter.

Category B: Individuals, who will open a salary account with EBL

arranging an irrevocable letter from employer to deposit only their salary with the Bank.

Category C: Individuals who will avail the loan by depositing postdated cheque for each EMI amount.

4.3 Product Description and Features:

Availability

EBL all branches.

Loan amount

Minimum Taka 50,000/Maximum Taka 3, 00,000/- or 3 times of Gross salary, which ever is lower.

Interest rate

Category A: 18% Category B: 19% Category B*: 20%

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Processing Fee

1% up to 1,00,000/0.75% above 1,00,000/-

Stamp charge

All relevant stamp charges will be on borrowers account and will be debited from the account at the time of disbursement

Tenor

12,24,36 months

Disbursement

Credit to the customers deposit account with EBL

Repayment

EMI via standing order will be raised in the salary account, so that moment his/her salary is credited to the account, system will automatically debit the installment amount and credit it to the loan account.

Advance/Partial prepayment Early payment Fee

Not allowed

Early full and final settlement is allowed. Penalty for early final settlement is TK. 1,000/- flat.

full and

Installment failure charge

Penal interest of 3% p.a. on the dues amount.

Top-ups

Not Allowed

4
CAR LOAN

EBL Car loan is a terminating loan facility (EMI based) of the purpose of brand new and reconditioned but unregistered automobiles for personal use only. (Unregistered means first time registration is yet have to done. Purchase of second hand vehicles are not allowed unless exception approval obtained jointly from MD and DMD. Please refer to section Permissible Exceptions at later part of this document.) 23

4.4 Description and Features:

Purchase value new and reconditioned Car, Jeep, Station Wagon, 4Wheeler, Microbus for private use only: - Brand new-any brand at purchasers choice Purpose

Reconditioned-Toyota brands preferred. Cars older than 4 years will treat as an exception.

Availability

Purchase value refers to car price as quoted by the Vendor and may include VAT and Registration cost. However, it does not include comprehensive insurance cost that is on purchasers account. All EBL branches subject to CPV being in place - Minimum TK. 3,50,000/Maximum TK. 50, 00,000/- or 15 times of gross monthly income, whichever is lower. (Maximum Loan allowable for purchase of very high value or premium vehicles was TK. 1, 00 crore, however Bangladesh Bank fixed loan ceiling of TK 20 lac recently. So, maximum amount will be TK 20 lac from the publication of this circular.) Loan cash Loan cash Loan cash Unsecured coverage 100% coverage 75% coverage 50% 11.75% 12.00% 13.00% 14.00%

Loan Amount (minimum and maximum)

Interest Rate (Interest rates can be changed by ALCO from time to time based

Processing Fee

1.00% of the loan amount for all cases other than 100% cash secured. For 100% cash secured cases, it is 0.5% of the loan amount.

24

Loan vehicle Piece Ratio

100% cash covered: 100% of quotation price 75% cash covered: 100% of quotation price 50% cash covered: 100% of quotation price 0% cash covered: New 75% Recondition 70% (Price includes car value + VAT + Registration) Customer will bear comprehensive insurance cost. Reconditioned Vehicles above 3 Brand New and years old reconditioned Vehicles 3 years

Tenor

12-48 month

12-60 months

Disbursement

-On loan being sanctioned, Vendor will register the car on behalf of Eastern Bank Ltd. Vendor also collects the copy of the comprehensive insurance (Insurance company from EBL approved list) and submits both the documents along with the delivery Challan for the car to EBL. - CASA (in case of new customer, a current/savings account will be opened in customers name). -CFC will disburse Loan amount through CASA. On email confirmation from CFC, branch will issue P.O favoring vendor by debiting CASA. P.O will include only the loan amount portion of total quotation amount (i.e. excluding borrowers equality) Branch to ensure PO commission and VAT will deduct from customer CASA. R.M will organize to send the P.O to the vendor.

Repayment

System will auto debit installment from customers CSAC account. Allowed after 6 month. At least minimum 30% of the loan outstanding must be paid by the customer while making advance/pre-payments amount. Fee: 1% of the partial payment amount. Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.

Advance /Partial pre payment

Early payment fee Installment failure charge Stamp charge

Penal interest of 3% p.a. on the dues amount.

All relevant stamp charges will be on borrowers account and will be debited from the account at the time of disbursement Customer can avail more than 1 loan from EBL if income and

25

Top-ups

Personal Guarantee

One [1] Personal Guarantee for businesspersons and self employed. - A guarantor can provide personal guarantee once only for any EBL consumer loan. - Eligibility of guarantor: Individuals with ranges equivalent Senior Assistant Secretary or higher would qualify as grantor. Bank and NBFI officials (equivalent to AGM of NCBs, AVP/ Branch Manager, Department Head of Local and Foreign Banks and NBFIs), Professional (Doctors, Engineer, Chartered Accountants etc.) have to provide copy of their professional certificate.

DBR supports [Separate, new loan account will be created in the case of top-up, i.e, will not be an additional draw down over existing loan account] One [1] Personal Guarantee for salaried executive.

5
DEBIT LINE

Debit card has substantial momentum across the world due to its customer-oriented features. Customers prefer debit card for cash withdrawal & shopping purpose. Offering small overdraft facility in debit card has become a popular product worldwide. Risk profile of the debit card is much lower than that of credit card due to small ticket size and due to allowing only to executives of selective corporate client & professionals as per enclosed list. Debit card is more of a transactional facility than credit card. However, EBL is planning 26 launch credit card, this debit line to would not hinder sales prospect of credit card since initial credit

4.5 Description and Features:

Debit Line is an unsecured and revolving credit facility for any legitimate purpose.
Debit line is an any purpose unsecured OD facility to be drawn through charging debit Card. Any credit worthy individuals like : Salaried Executives of priority organization & Corporate Organization (List enclosed) Self-employed Doctor, Engineer, and Architect. Employees of POL (Priority Minimum Tk. 20,000/Organization List), provided Maximum Tk. 1, 00,000/in the later section. or 5 times of gross monthly Self Employees of COL income, whichever is lower. (Corporate Organization List), provide in the later section. EBL Employees will also fall in A Category Employees of COL Minimum Tk. (Corporate Organization 20,000/List), provided in the later Maximum Tk. section 50,000/- or 3 times Self-Employed of gross monthly Professionals like Doctors, income, whichever is lower. Engineers, and Architect. Govt. employees

Purpose Target Customers

A Category customer & Limit

B Category Customer & Limit

27

 Executives of POL & COL and Professionals who are holding the credit card of SCB/PrimeBank/Lanka Bangla C Category & Limit

Minimum Tk. 20,000/ Maximum Tk. 50,000/- or 80% of exiting limit (highest limit of all cards) of the existing credit card of SCB/Prime Bank/ Lanka Bangla, whichever is lower. Applicant having credit cards of other Banks may also apply for A & B Category meeting the criteria.

Non target customers

Availability Interest Rate Interest Rate for EBL Employees Interest Accrual Processing Fee Available cash Withdrawal limit

Businessmen Lawyer Individuals with political affinity Journalists of reasonably lower level Defense official below Lt. Colonel level All branches subject to CPV in place 20% 15% p.a Interest would accrue on daily basis based on EOD balance and would be applied on monthly basis. 1% of the approved limit or Tk. 1,000 whichever is higher. Processing free will be waived for EBL employees. Client would be able to withdraw full amount in cash through ATM as per ATM cash withdrawal policy. Monthly statement covering the limit, minimum payment due, payment deadline, utilization and available room and transaction history etc. would be provided to the customer due the card Division within the first week of every month. The statement has to be generated by the system. Revolving limit for 12 months, Initial limit expiry date to be set on quarter end only (nearest quarter of a year). (e.g. Limit loaded on January 25, 2006 will expired on December 31, 2006) (e.g. Limit loaded on February 18, 2006 will expired on December 31, 2006) (e.g. Limit loaded on April 25, 2006 will expired on March 31, 2007) No grace period for interest will be allowed.

Monthly Statement

Validity

Grace Period

28

Repayment

Penalty & Late Payment Fee

Client may reduce/repay outstanding through standing instruction option, sweep in option & through cheque/cash deposit. Clients need to repay every month 5% of month-end total outstanding by the 15th of each month. This will be the minimum payment due. 3% on outstanding on expired account. Minimum Payment failure charge is Flat Tk 200/= to be charged and applied in the Debit Line account. If applicants fail to make available monthly repayment for consecutively 3 months or more over the tenor of the facility, entire outstanding will be called back by collection department. Bank reserves the right to call up the line at its discretion or in the event of default. Renewal Fee would be 1% of outstanding or Tk 1,000 whichever is higher Renewal fee for EBL employees will be waived. Early full and final settlement is allowed. No early payment charge is required No Personal Guarantee will be required for Debit Line Good Boy/ Good Girl Note or KYC will be required for all Debit Line Applications All relevant Stamp charges will be borne by the Borrower and will be debited from his/her account, at the time of disbursement. 1 EBL UDC covering full limit. No cheque book will be issued against EBL Debit Line account

Facility call Up

Renewal Fee

Early payment Fee Personal Guarantee Loan KYC Stamp Charges Updated Cheque Cheque Book CIB Nationality Age

No CIB is required Bangladeshi 22-66 years old Salaried Executives: Minimum 1 year of permanent employment with present employer. Professionals: Minimum 1 year of practice in the profession Minimum BDT 15,000/- per month Minimum BDT 12,000/- per month (For Govt. Employees) Minimum BDT 20,000/- per month

Length of Service/Practice Income for Salaried Executives Income for Self Employed Professionals

29

6
FAST LOAN

4.6
Fast loan is a short-term loan facility from EBL. This loan is fully secured against cash security (EBL FDR, Govt. Sanchaya Patra, ICB Unit certificates etc.). EBL Fast Loan has convenient repayment period ranging from 12/24/36 EMI's. EBL Fast Loan is priced at competitive rates and loan is sanctioned within 24 hours of application

7
FAST CASH

4.7
EBL Fast Cash is a revolving credit facility. Fast Cash allows the customer to draw up to a predetermined amount of credit from their Current Account. Customers will only be charged interest for the amount they draw. The minimum limit for EBL Fast Cash is Tk. 50,000.00

4.8 Guidelines For 100% Cash Covered Loans:

1. Supporting identification documents will apply as part of KYC. But the
general attitude will be lenient in this regard too. Basic identification is all that is required, and we will ask for nothing more than what is basic. s

30

2. No UDC and no PDC will be required since it is free to credit risk. UDC and PDC are for ensuring payment guarantee. For a 100% secured terminating loan, payment is guaranteed anyway. Hence no UDC or PDC.

3. CIB thing will be based on the policy of CIB. If CIB policy gives any leeway on this for 100% secured cases, we will take that leeway. If not, CIB to be obtained.

4. A LAP has to be properly filled up in any cases only thing we will keep in mind: its a 100 secured loan, hence there may be some sort of relaxation n minor items. No compromise on major items in the LAP though.

5. Income: for cases like these, income needs not be substantiated. Client will just declare his income, which will be noted in the LAP. No supporting paper to prove income is needed. Hence, no bank account statements etc are needed.

4.9 Interest Rates on Deposits:

The Asset Liability Committee (ALCO) of the Bank in its special meeting held on May 07, 2007 as decided to introduce new interest rates on deposit, which will be effective from May 07, 2007.

31

Types of Deposit (HPA/SB/STD)

HPA less than 1M HPA more than 1M Saving up to 1M Saving above 1M STD- less than 10 M STD- 10M to< 30M STD- 30M to< 100M STD- 100M to< 150M STD- 150M and above STD- Bank STD- Collect STD- IPO Proceeds

Rates Effective From May 07, 2007

6.00% 6.00% 7.00% 7.00% 6.00% 7.00% 8.00% 8.00% 8.00% Market Rate 8.25% 8.00%

Types of Deposits (FDR)

FDR-1 Month- Less than- 5M FDR-1 Month- 5M to < 10M FDR-1 Month- 10M to < 50M FDR-1 Month- 50M to < 100M FDR-1 Month- 100M to < 150M FDR-1 Month- 150M and above 8.25% 8.25% 8.25% 8.40% 8.40% 9.25%

Table: 5

Loan Approval Process

Consumer loan of EBL are processed and approved through its Consumer Finance Center. Before the establishment of CFC, branches had the authority to approve &

32

disburse loans though consultation with higher authority Head of Consumer Banking, Deputy Managing Director, and Managing Director. As the process faces some crucial pitfalls, management of EBL decided to set up a central unit CFC- that will be responsible for loan assessment, approval, disbursement, and collection.

4.10 Consumer Finance Center:

CFC is located on the second floor of Jiban Bima Bhaban, Motijheal, Dhaka. CFC has set up on March 15, 2004 for evaluating credit worthiness in consumer lending. It will consist of a team of people to identify, analysis, measure and manage risk related business.

4.11 Structure of CFC:

CFC handles all the retail loan applications coming from all the branches and Direct Sales Teams (DST) across the country.

4.12 Management Structure:

The management hierarchy of CFC is very simple as total much of employees are only 16.

33

Head of CFC

Manager

Credit Analysis

Security & Disbursement Collection & Recovery

Management Information System

Fig: 2 Management Structure

4.13 Responsibilities of the Department of CFC:

Head of CFC:
The head of CFC is primarily responsible to oversee the activities of CFC & to collaborate with the 25 branches across the country. Daily activities include Consultation with prospective client where necessary, _ To assist analyst group to measure credit risk, _ To provide information and to keep contact with higher authority HOCNB, DMD, MD and _To take measures to keep smooth operation.

34

Manager of CFC:
Manager of CFC has the authority to approve or decline loan applications. If his authority does not permit, then he consults with higher authority. Credit Analysis is one of the core activities that can make a difference in retail banking. If an eligible Client is refused then the revenue of the banks decreases and if an unworthy client is included loan disbursement, bank may face loan defaults. CFC has five (5) members dedicated to assess credit risk in consumer lending. They can also take help from higher authority- manager of CFC, Head of CFC where necessary.

Security Checking & Disbursement:

Officer lading support & officer disbursement both cheek all the relevant documents and give authorized signature where necessary. If discrepancies or any fraudulent is found, they consult with manager CFC and if everything is okay then disburse the loan.

Management Information System (MIS):

Within the CFC, two people keep track of all the laps that CFC receives or CFC returned. MIS officer provide a database that contains all true relevant information of each and any lap irrespective of there status- approved, declined, disbursed, pending on process, place for decision, sent to queries. It serves an important purpose of inform all related members about retail loan. The branch managers may also benefit from this MIS as it updates every two or three hours. The next part describes how CFC handles loan application and gives decision, which means the actual loan sanction process of Consumer Finance Center. (1) Jiban Dhara Loan. (2) Utshab Loan. (3) Executive Loan. (4) Car Loan. (5) Debit Line and (6) Fast Cash (7) Fast Loan

35

4.14 LAP Work Flow for All Consumer Loans:

Branch Level
Lap filled & assessed by ARM/ RM and necessary Recommendations taken

CFC Level
CFC (MIS) receives the lap, gives necessary input and hand over to analyst group for assessment. Lap with major discrepancy will be returned to branch and lap with minor discrepancy will be assessed and needs to rectified Approved laps will be review by Manager-CFC, HOCFC and where applicable by HOCNB, DMD, MD

Final review by supervisor

CFC informs branch about approved laps, ask for necessary documents if needed, and wait for CPV/CIB clearance

Branch provides documentsSanction letter, UDC, DP note

CFC checks all documents & CIB/CPV if found ok then

disburse.

Client receives money on the same day by electronic fund transfer.

CFC (MIS) status updated

Send for storage in CFC

Necessary stamps will be attached, copy of sanction letter, return to client.

Fig: 3 LAP Work Flow

4.15 The Lap flow chart described in details:

36

Loan Booking:
EBL consumer loan has two sources (Direct sales team) DST & Branch. There are 25 branches & more than 250 DST in EBL. DST knocks prospective clients and collects information about them. After preliminary screening, they invite client to EBL Branch. If the client is a walking customer then the ARM & RM stars talking with him/her. If client expresses strong will to avail a JDL/UL, The employee in change wills request her/him for the following documents Applicants photograph and visiting card (if available). Copy of valid Passport/Voter ID/Driving License/Others. Last 6 months bank statement (Personal/Company). Copy of TIN certificate. Bill copy of T&T/Mobile phone/ Contract copy of pre-paid phone. Other loans sanction letter and last 6 months bank statement of that. Letter of introduction by the organization. One (1) personal guarantor, copy of guarantors TIN, visiting card, photograph and sign verified by the applicant. Copy of Trade License. Memorandum and Article of Association certified by Joint Stock company. Summary of Share Capital (Form X and XII) Partnership Deed of Partnership firm. If other income added than required supporting documents. CIB report.

37

When client submit the above documents (not every document is essential but it varies client to client) the ARM or RM performs the following tasks: (1) In presence of ARM/RM, client fills the pre formatted lap A. Personal Information and contact details. B. Joint Applicant (spouse only) C. Employment details. D. Financial information Monthly income & expenses. E. Bank A/C Defaults.

This bank A/C details will help managers to access clients income. More over, for loan purpose, client must open an EBL current A/C.

A. Facility Defaults. B. Debit Authority. C. When this part of lap is filled properly, client will give signature with date on pre-formatted space and it must be verified by RM/SSM. The next part of lap will be filled by branch; here branch will provide a documentation cheek list whatever the documents required by the bank.

(2)Branch fills the Loan KYCB. Good boy/ Good girl Assessment curd It is also called KYC. Her branch delineates clients Background, Education, Personal life, Lifestyle, Credit worthiness, Loan behavior, Criminal record, Compliance, Appearance, and Willingness to repay.

38

These ratings are gives in each category. High Rating Excellent beyond any question or doubt Medium Rating- When performance or position of that client is in respective criteria cant be assessed with full certainty but however estimated or known to be okay. Low Ratings When position on performance is Not known to Branch or doubt full.

Loan KYC-serves a key role in evaluating loan proposal as CFC employees never
met them physically, KYC help then visualize the client, his behavior, his family status and so on. Under the KYC table the officer in change produces summary comments, recordation and waiver (if sought) with signature of the respective authority.

At this point, the branch manager sends the lap to CFC.

On receiving Lap, MIS (CFC) inputs some basic information about the client and assigned a Lap number. This number is used for further reference. Excel sheet of MIS containsSerial no, Lap receive date, Credit officer, clients name, source- branch /DST, Applied amount, Approved amount, CPV (out) date no which CPV asked for, CPV (in)- date on which CPV received, Status- Approved/Declined/On process/ Pending/ Cancelled/ Disbursed, Comments, Status date, Disbursed date.

39

Sample of MIS Excel Sheet:

40

41

MIS update data on a continuous basis, so whenever any action taken or any loan status changed MIS inputs it. MIS is built in a way that with short notice MIS can produce Daily status report Approved loan amount report. Status report sort by branch, approved amount, credit officer, date, week, month and so on. MIS officer distributes the laps received each day to the credit analysts for credit assessment, recommendation & approval. Retail Credit Assessment: (Same for All Loans) 6 persons are employed for credit analysis at CFC, EBL. Two are specialized in car loan analysis and other analyst evaluates rest of the loans.

Credit Analysis:
Credit Analyst will read the lap carefully before embarking on finding credit worthiness that is income assessment. Loan KYC helps analyst to judge the clients social status and some other attributes. Then analyst focuses on key area assessing financial capacity of the borrower.

Credit approval authority:

Product Jibon Dhara Loan Utshab Loan Executisive Loan Car Loan Debit Loan Manager CFC Upto Tk. 3.0 lac Upto Tk.5 lac Upto Tk. 3.0 lac Upto Tk. 5.0 lac Upto Tk.5 lac Approval Authority HO CFC HO CNB Upto Tk. 5.0 lac Upto Tk. 7.0 lac Upto Tk. 1.0 lac Upto Tk. 5.0 lac Upto Tk. 10.0 lac Upto Tk. .7 lac Table: 6 Upto Tk. 1.5 lac Upto Tk. 10.0 lac Upto Tk. 15.0 lac Upto Tk. 1.0 lac
DMD/MD

Upto Tk. 10.0 lac Upto Tk. 20.0 lac -

42

Approval Sheet:
The credit analysts will recommend to approve or decline the loan based on his/her judgment. If the loan is approved then, analyst will fill the laps approval sheet. On this sheet, we will find the table that shows monthly income claimed by applicant, and other income assessed by branches use CFC. Only the CFC validated income will be considered is computing debt benumb ratio and other important items. To evaluate clients capacity to pay the EMI analyst will find ant EMI as a percentage of average balance & Debt burden ratio on CFC validated income.

Value based DBR will be considered as follows: Monthly Income (Taka) 10,000-29,999 30,000-49,999 50,000-99,999 1,00,000+
Table: 7

DBR 35% 40% 50% 55%

If the DBR and percentage of average balance are consistence, with assessment guideline, analysts will wait for CPV and CIB inhere required.

4.16 Verification Process: 4.16.1 CPV (contact point verification) Report:

Consumer Lending CPV/ Policy and Process Guideline

43

1. Introduction:
Verification is an integral part of credit appraisal, as it validates the information that is being used for assessment. At EBL, verification' is segregated and defined as below: 1. Contact point verification (CPV) 2. Bank Statement Authentication 3. Credit Report 4. Rent Verification 5. Guarantor's verification 6. Car value verification Verification ensures that credit assessment was based on authenticated information. It is vital that credit decisions are based on accurate and correct information. Verification is within the purview of CFC but it is conducted by independent agency(s). The third party agency ensures that adequate measures are in place to eliminate any conflict-of-interest situations. With increase of volume as well as number of customers, though presumably a simple task, verification has become sizable both in numbers as well as from cost point of view. This document intends to parameterize process of verification and outline a standard Procedure.

2. Objective:
The objectives of this document are as below: 1. To outline procedures to parameterize verification process through third-party agencies 2. To formulate procedures which will be used as yardsticks for performance evaluation? 3. To reengineer existing process and improve turn around time (TAT).

44

4.16.2 Contact point verification (CPV)

Contact point verification (CPV) consists of the following items Residence Address - where the applicant(s) resides Office Address - workplace of applicant(s) i.e. primary source of income Residence Telephone - fixed telephone, which is at residence (if any) Office Telephone - fixed telephone at workplace along ext. (if any) Mobile Telephone - Applicants own mobile phone, which is available with him/ her

4.16.3 Bank Statement Verification:

Here bank statement verification indicates to other bank statements that are being used for income assessment. In addition to that, other statements may be forwarded for verification to be more certain. There are few exceptions with regard to foreign banks, as their statements are difficult to forge. In addition, it is easier to identify fabricated statements of foreign banks.

4.16.4 Credit Report:

Credit Report indicates to other bank opinions about present standing of the line of credit(s) the applicant is enjoying. Credit report provides a brief picture of the present condition of the facility that the applicant is enjoying. Credit report may be asked for Cash Credit / overdraft facilities, Installment loans, or other credit facilities which are relevant to assessment.

4.16.5 Rent Verification:

Rent verification is done to ensure the rents declared are accurate. In addition, it allows us to know the present condition (leased or vacant) of the space. Most of the cases, rents are being paid in cash. It is difficult to identify the cash flow from bank statements alone. Verification provides a detail view of all these aspects.

45

4.16.6 Procedure:
CFC initiates verification process. After CPV assessment, bank statement authentication, credit report and / rent verification (where applicable) requests are forwarded to verification agency.

4.16.7 Time of receipt of request and submission of report:

Every working day except for Thursday verification agencies would collect all the days' requests on or after 1800 hrs. Prior to collecting requests verification agency will submit their last day's reports. The submission turn around time will be 24 hours, but not exceeding 48 hours. Corresponding charges for verification will be guided by agreements signed between the bank and the agency.

4.16.8 CIB (Credit information bureau) Report:

To be confirm about the loan status of the client, Bank requisites Bangladesh Bank to issue a CIB Report. This is a confident ional report and Bank provides this only to authorize institution. The CIB Report shows the analyst about the loan status of the client- If the customer avails no loan status will be nil. If client has any other loan, then CIB will provide details of that loan- Loan amount, Banks nil, Current status (Classify or unclassified), payment behavior and so on. If analyst fined the CIB okay, then he/she recommends for approval. Credit analyst job is to make recommendation, not to get the loan approval. The higher authority will review along with other recommendation by the analyst and then it will be approval respect authority. Higher authority has the power to cancel any loan approved without contacting analyst. Therefore, a loan recommended by analyst, approve by manager CFC/HOCFC/HOCNB can be declined by Managing Director /Deputy Managing Director.

46

Disbursement
Disbursement process includes making a find review of all the documents, clearance fund formation, stamping, MIS update, and CIB input. All they branch mangoes are informed by daily MIS status and they are commutated by the Disbursement offices. In general, any approval loan is disbursed on trust related documents are in place. Related documents include sanction letter signature by applicant and UDC. In some case, grantor description with signature, DP writes etc. Those loans that are approved office wait for the required document. When documents arrive, they try to disburse the loan on the same day.

5.1 EMI & UDC Value Calculation:

Disburse office has a programmed excel sheet that calculates UDC value automatically if data is entered. The table looks like this. Loan Amount Rate of Interest 1,00,000 15% For Auto Loan JDL Executive EMI/Month 3,466.53 For category A & B (Executive) Full cheek Amount 1,24,795. 18

Loan Tenor (In 36 months)

3 EBL UDC each UDC for 3 EMI Final EBL UDC

Table: 8

10,399.60

93,596.39

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5.2 Loans Disbursement CFC:

1. In the Teller ID go to the Application Header under the Application Processing under the Workflow Transactions. 2. 3. Press the New tab at the top and fill all the fields. Click the Primary customer tab at the bottom, another screen will appear and press OK tab at the bottom. After pressing OK, a new screen will come called customer Addition. If loan applicant is a new customer to the Bank, fill all the fields and then press oval customer and then press OK tab at the bottom. 4. Press the Loan Details tab at the bottom and a new screen will arrive. Fill all the fields and press OK button at the bottom. System will get back to the first screen and then press OK. System will arrive. You loan application number and write down this number. 5. Press the Applicant Tab at the bottom and press OK tab when a new screen appears. Then press close tab at the bottom. 6. Press the documents tab at the bottom and a screen will appear. Put the cursor on the row one after one and press received tab at the middle when mandatory state is Y in case of N state you can press waive tab and then Press OK tab at bottom. 8. Select the Mark Data entry at the top of the screen and a new screen will appear. Select the product code and the application number and press the Mark Entry Complete Tab at the bottom. A new screen will appear and if there is no

48

message under the Fatal error part simply press OK tab at the bottom. Then go out of the screen by pressing the close tab at the bottom. 9. Then go to the Recommend screen under the Application Processing in the Workflow Transaction and press OK tab at the bottom. 10. Again through the Teller ID go to the Maintain Result screen under the Application Processing in tile Workflow Transactions. Pick the Application number and product from the pick list and press the Sanction tab. Fill the field and press OK. Then the previous screen will come and press the Close tab. 11. In the Authorizer ID go t0 the Authorize Result screen under the Application Processing in the Workflow Transaction and press OK tab. 12. Go to the Offer Letter Printing screen through the Teller ID under the Application processing in the Workflow transactions and press The Get Tab. Tick the box under the print column and press the Print tab. 13. Go to tile Customer Acceptance screen under the Application Processing in the Workflow Transactions fill tile fields and press OK. 14. Go to the Loan Account opening under the Application Processing in the Workflow Transactions and pick the Application Number and the Product name from the list and press OK. System will generate the Loan cucumber. 15. Through the teller ID go to the Account Document under the Other Transaction in the Loan Account Transaction and fill the fields and press the tab button. A matrix will come on the screen and if you find Mandatory status is `Y' and Status is `N', just click the N and a small dialogue box will appear. Change the NO to Yes and press OK a: the bottom. 16. Need LOCAL AUTHORIZATION. System will say "Record Modified'. Then CLOSE. 49

17. To the Set up Account Disbursement under the Other Transaction in the Loan Account Transaction and fill the fields. - Put loan A/C number - First repayment date - Payment mode: Savings transfer - System will say: A/C belongs to a non-replicate customer

18. Need LOCAL AUTHORIZATION. Finally do the Disbursement the way instruction is done. System says: 'DISBURSEMENT DONE' PRESS OK -------- PRESS CLOSE

19. Go to the Pay Instruction screen under the Other Transaction of the Loan Account Transaction and select Add option and fill all the fields and press OK. Authorize it by the authorizer ID. To disburse Loan from Loan Account to Savings Account go to :

Loan Account Transaction Transfer Disbursement by Transfer to savings.

50

Collection & Recovery

6.1 Few General functions:
Loans system to generate a repayment schedule on the approved loan terms and conditions. Repayment schedule prepared at the time of sanction, unless rescheduled under very rare circumstances, will remain in force throughout the life of the loan. Monthly installments to be collected from the customer's account through direct debit instructions authorized by the customer. The complete loan data, record of accomplishment and history to be retained in the system for future reference. New requests to be filtered against the historical data and live data to check double financing. OCR to maintain a logbook for recording details of all contacts, discussions, and letters sent and visits via diary notes within 24 hours of each contact.

6.2 Delinquencies:
Delinquent accounts as identified by system will be categorized into buckets based on their DPD (Day Past Due) status: Days Past Due (DPD) 1 - 30 DPD 31 - 60 DPD 61 - 89 DPD 90 - 180 DPD Rating Delinquent 1 Delinquent 2 Delinquent 3 Substandard Actions in Brief Reminders to Borrower through mail and telephone Physical visit made to office and residence Employer and Guarantor where applicable informed Account classified and written off.
Table: 9

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The collection stages and the actions taken in each stage have been described Below- Delinquent accounts as identified by systems to be categorized into buckets on the basis of their 'DPD (Day past due)

Collection Stage 1: Front end (130 Days past Due) DPD 1-14 15-30 Activity /Effort A grace periods of 7 days will be given to the customer to deposit due installment. 7 Written requests for repayments to be sent out to the customer. Officer Collection & Recovery (OCR) will make phone calls to the customer requesting payments. The sales staff IRM who booked the deal will be informed of the status and will be asked to contact the customer as well. Reasons for delinquency will be noted and payment commitment (not exceeding 7 days) will be obtained. Manager CFC will review the delinquent account and will follow up on payment commitments. Outstanding accounts will be divided between the front-end collectors and their individual efforts will be monitored. Customer will be allowed to make another commitment for repayment of the outstanding amount.

52

 OCR will call (2"d call) the customer, reinforce payment conditions and will request payment within next 7 days. OCR to be very polite- our position reminder only on payment commitment and date. Manager CFC assesses the need of field visit by the Officers. During this time the department will also start following up for the installment that is payable in the next month.

Collection Stage 2: Mid range (31 - 60 Days Past Due)

DPD 31-39

Activity /Effort A second reminder letter is sent to the customer notifying that the account is delinquent and late payment charged. Third phone call is made at the residential and office addresses for collection.

40 -49

A third reminder letters is sent to the customer notifying that the account is delinquent and late payment. Fourth phone call made to borrower and OCR explains the problems the customer might face if the account moves into delinquent status. Maximum usage of the OCRs to be made by conducting visits at the residential and office addresses. Fifth telephone call to borrower and contact with family/ reference/guarantor is initiated to exert pressure on the defaulter.

50-59

In case of no success by the Officer, the Manager CFC will step in. Manager CFC will contact the customer.

53

Collection Stage 3: Hard core (61 - 180 Days past Due) DPD 60-89 Activity / Effort the employer/ guarantor are sent letters informing them of the delinquency of the borrower. Account is moved into 'non accrual' status after encasing securities if there are any (Any residual account balances, securities for any other products) 90 -120 a maximum of three legal notices (at fortnightly intervals) will be served to the customer and the guarantor with copy to employer. Record provisions for write off as per credit policy. Loan is called up and the customer is informed through Registered Letter with CC to employer / guarantor (as applicable). The undated cheques for the entire loan amount is dated and placed for collection.In case of Category C, Guarantee is called up and guarantor is requested to settle the entire outstanding within 3 days from receipt of the letter.Within 7 days of the return of the last cheque OCR will lodge FIR with the nearest police station. 120-179 OCR will provide a weekly update of delinquency follow-up (phone calls every week, until contact is made to all three as applicable) will be provided to the Manager CFC. Manager CFC will periodically update the Consumer Head regarding pending cases. 180 write off Maintain a logbook of customer, guarantor, and employer to ensure no new loans are given. 54

Other banks will be informed of the defaulter and Central Bank for inclusion in CIB database if possible.

In future, we will look at the possibility of handling over delinquent, substandard, and written-off cases to Collection Agency.

Format for the regret letters and collection letters have been attached as Appendix-III Consumer Finance- MIS

The MIS for Consumer Finance Center should have the capacity of maintaining huge amount of data and generate required reports, whenever necessary. Reports will help in tracking, planning risk, management, setting goals for sales and marketing, identifying trends and determining corrective actions if needed.

55

Conclusion

During my internship at EBL, I got the opportunity to see how bankers attract customers, assess credit risk, evaluate loan proposal, approve & disburse loans and enucleate dues. The findings are as follows-

EBL handles all consumer loans through this consumer finance center except Fast Cash and Fast Loan- two (2) 100% secured loans that are approved and disbursed by branches. All the loan applications are sent to CFC for assessment with related documents.

Receiving the applications, CFC begins evaluation processes and contacts sales team members or relationship manager. If preliminary screening allows the analyst to recommend for approval, the applications are sent to appropriate authority. After confirmation, CFC takes initiative for loan disbursement.

CFC current activities are satisfactory but with increasing workload and complexity, It must revise its job responsibility in order to move ahead.

At present, CFC receives on average thirty-loan application. It has six analysts to access credit risk. One disbursement officer (CHECKER) check document and communicates with respective brunches if additional paper work needs to be done. Two disbursement Officer (MAKER) disburse twenty loans per day approximately

56

Recommendation

1. CFC has to revise its members job responsibility. If responsibilities are not delegated properly, It will hamper the control process for head of consumer finance center. 2. In some faces, brunches send documents with major faults. These are DP notes are not filled with approved amount, signature of the client and guarantor, is not verified by the ARM/RM, visiting curds are not sent, loan KYC does not include those information that are required, UDC contains wrong amount, and so on. These problems need to be addressed and rectify as soon as possible.

3. Branch managers have the tendency to make prurient phone calls to disbursement officer for getting the loan-disbursed earlier. These creates adverse problem as officers in charge of loan disbursement fail to consent properly on their task. It also increases the chance of error in their work. Therefore, practice of this type much be discouraged. 4. Flex cube- the computer software EBL uses for its Banking transaction has problems in speed. It is not as fast as required. The speedy software will help officer to disburse loan quickly.

5. Due to rise of provision rate on consumer lending, bank has raised lending rates. It is expected to hinder the loan growth as interest rate has inverse relation ship with demand for loans. In this condition, EBL must engage it self in vast marketing campaign of consumer loans and to penetrate in target groups.

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6.

EBL consumer loan has a consistent upward trend since its

inception. To deliver unique service and to respond to this surge, CFC needs employees with high caliber. Existing work force is not sufficient to take care of increasing number of Loan Application. 7. Poor coordination between CFC and branches has to be overcome. EBL extensively use e-mail and phone in this respect. If mittens and seminar can be arranged, then it may help solve this problem.

8. For collection department, a separate MIS is necessary. The new MIS should be developed in a way that can trace all the information of customers who have availed loans from EBL. There are only five members and if they have to find LAP physically, then it will impossible for them to perform the task of collection.

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References

1.Modern money and Banking. Miller & Van Hoose. 2. Banking Law and Practice. P.N Varshnay & Shri H.C. Sarkar. 3. Foundations of Financial Market & Institution (3rd edition) Frank. J. Fabozzi, Frank J. Jones, Michael G. Ferri, Framco Modigliani 4. Bangladesh Banks Prudential Guideline On Consumer Lending-20045 5. Annual Report of Eastern Bank Ltd. For the year of 2005, 2006, 2007. 6. Different journal published by EBL .

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