PBL CRM

EXECUTIVE SUMMARY
The banking business is as old as the civilization itself. As early as 2,000 B.C., the Babylonians
had developed a system of banks. They used their temples for lending at higher rates of interest
against gold and silver, which had left with them for safe custody. Around the same time, the
Greek temples used as depositories for peoples surplus funds and these were the centers of
money lending transactions. The priests of the temples acted as financial agents until they lost
public confidence because of peoples disbelief in religion. The development of Banking in
ancient Rome resembles the Greek pattern. After the death of Emperor Justinian in 565 A.D., the
mighty Roman Empire failed resulting in severe damage to the banking business. However,
during this period, banking mainly confined to money landing activities, which was largely in the
hands of the Jews and the Lombardy who lent money to all. The Christians has forbidden by
their religion to lend money on interest since it considered sinful activity. In India, the ancient
Hindu scriptures refer to the money-lending activities in the Vedic period. During the period of
Ramayana and Mahabharata, the Banking had become a full-fledged activity. During the Smriti
period, this also followed the Vedic period. However, in the ancient times, the main functions of
the banks related to granting of loans to individuals or the state in times of crisis. Later on, they
developed other activities, which we now call as banking business.
The banking sector has been dominating the economic development of a country by mobilizing
the saving from the general people and channeling those saving for investment and thus
economic development and growth. To satisfy the demand as well as to improve the commercial
banking service in our country, Prime Bank Limited, a scheduled bank, was incorporated to
initiate its operation with the aim to play the vital role on the socio-economic development of the
country.
At present Prime Bank Limited (PBL) is one of the leading private sector banks in our country in
terms of quality services to the customers & value addition for the shareholders. Financial
soundness of any financial institution is the prime concern for its survival in the competitive &
changing business environment. This is more important in case of the banking institutions. Prime
Bank Limited is a fast growing bank and several times it occupies the first position in CAMEL
rating. This indicates that Prime Bank Limited is running ahead of the peak.
I was assigned to PBL for the purpose of identifying the intricacies of a profit oriented financial
institution. While preparing this report I have focused on Loans and Advance and tried to reveal
the insights of the consumer Loans and advance services of the bank. Simultaneously efforts
have been make to provide an in-depth analysis on the procedural of Consumer Loans and
advance and performance of different loans and advance products of Prime Bank Limited.
Finally few recommendations and suggestions were also prescribed based on the observation and
findings.
The core function of a bank is performed by the credit department of the bank. In the case, the
relationship of bank customer is that of the credit and debtor. PBL Bank offers following types
of loans and advances, Secured Overdraft (SOD),Loan (general), House Building Loan (Staff),
Term Loan ( Industrial) Term Loan (Others), Staff Loan Against provident Fund, Consumer
Credit scheme (CCS), Cash credit (Hypothecation & pledges), Landing Risk Analysis (LRA) &
Loan against Trust Receipt (LTR). Documents include vouchers, cheques, bills, pay-order,
promissory notes, and securities for leases / advances and claim by or against the bank or other
papers supporting entries in the books of the bank. Secured Overdraft (SOD) charges 14%
interest and it continues advance facility given for one year but can be renewed after the expiry
of the time. Given against I.C.B unit, FCB, Sanchaypatra and Work Orders. General loan charges
14% interest an it is given against personal guarantee, Hypothecation of goods and land and
building. House building loan charges 7% interest and it is given against personal guarantee, land
and building. Consumer credit scheme charges 16% and it is given personal loan for T.V.
Computer etc. into two years. Transport loan (Staff) charges 14% it given against personal
guarantee and hypothecation of vehicles. Transport loan 9General) charges 14% it given against
personal guarantee and Hypothecation of vehicles. SOD charges 14% it is given against personal
guarantee and cash collateral securities. Industrial credit charges 14% a short term arrangement
by which a customer is allowed to borrow money up to a certain limit is sanctioned by bank for a
certain time. Given against registered mortgage of land and building, hypothecation of goods and
personal guarantee of Directors. Past due bill charges 15% it given against bills receivables.
Loan against trust receipt (LTR) 14% advance allowed for retirement of shipping documents and
release of goods imported through L/C. The goods are handed over to the importer under trust
with the arrangement that sale proceed should be deposited to liquidate the advance within a
given period
Copy of Registered Partnership Deed duly certified as true copy or a partnership Deed on non-
judicial stamp of Tk.150 denomination duly notarized. In case of limited company; Copy of
Memorandum & Articles of Association of the company including Certificate of incorporation
duly certified by Registrar Join Stock Company (RJSC) and attested by the Managing Director
accompanied by an up-to-date list of Directors, Copy of Board Resolution of the company for
availing credit facilities and authorizing Managing Director/Chairman/Director for execution of
documents and operation of the accounts, Copy of last audited financial statement up to last 3
years, Personal Guarantee of all the Directors including the Chairman and Managing Director,
Certificate of registration of charges over the fixed and floating assets of the company duly
issued by RJSC,
The facilities categorized as Consumer Financing are given as bellow: Easy Loan means secured
personal loan to meet personal financial requirement, Consumer Durable Loan means loans to
purchase consumer durables for personal/family use like TV, AC, Washing Machine, Computer
etc. Parua or Education Loan means loan to individuals of children, Thikana or House
Building Loan means loans to individuals for purchase of flat/construction of own house, Flexi
Loan means personal loans to meet personal financial requirement without any security,
Peshajeebi Loan means loan for professionals to purchase of items to support professional
needs. Auto Loan means the loans to purchase new or reconditioned vehicles for personal use
only.
No doubt the yearly growth of the outstanding of Loans and advance in PBL is satisfactory. But I
think opportunity to earn more profit has been overlooked because of a number of factors, which
can be easily remedied. In my study I have tried to focus which product is giving more interest
and the bank management should be more careful about which product. I recommend taking
some marketing officers and executives in Marketing Division who has some experience
regarding bank product marketing specially the Loans and advance. PBL also can go for some
promotional activities through their L&A Department. Different marketing and research cell
should be established to improve PBLs service. Incentives should be provided for retaining the
prime customers and disbursement of consumer credit facilities should be easier to allure the new
customers. I do hope that my study will be helpful for the future operation of the Loans and
Advance Department of Prime Bank Limited.
Background of the Study
The bank plays an important role in the economy of any country. The banking system of
Bangladesh is composed of variety of banks working as nationalized commercial banks, Private
Banks, foreign banks, specialized banks & development banks. However there are many private
banks in Bangladesh. At present, among other banks prime bank limited plays as a leading banks
to provide efficient banking service with a view to accelerating socio-economic development of
the country. Day by day, new competitors appear with better ideas & Products as well as service.
Consumer credit scheme one of the new innovative idea which cater to the credit needs of the
low & middle income groups for household durables. In a present time, few banks operate this
scheme with short volume. Only Prime Bank limited & a very few banks operate this scheme in
a large volume. To make its position more strong, PBL wants to make this scheme more
attractive to the customer. In this regard, the management of the PBL assigned a comparative
analysis on this scheme & to find out its position than that of private banks & to ensure efficient
& effective banking operation in a sound manner.
Objectives of the Study
The main objective of the study is to gather practical knowledge regarding the Performance of
loans and advance operation and management of a commercial bank. This practical orientation
gives us a chance to co-ordinate the theoretical knowledge with the practical experience.
Following are the objectives of this practical orientation in a bank:
To have an overall idea regarding the Loans and advance of a commercial bank.
To gather knowledge about loan and advance.
To identify sectors where the bank is giving loan and advance.
To identify the Documentation & Guideline for Loan & Advances.
To have some practical exposure that will be helpful in the practical life.
To apply theoretical knowledge in the report writing time.
To observe the working environment in commercial banks.
To study existing banker-customer relationship.
To recommend the bank in managing credit more effectively and efficiently based on the
findings in the bank.
Origin of the report:
This report originates to fulfill the requirement of studying BBA Program of Northern University
Bangladesh. This program has been designed to facilitate the students with basic theoretical and
practical knowledge in the job activities in the context of Bangladesh as well as worldwide.
Since the BBA program is an integrated ,practical and theoretical method of learning , the
student of this program are required to have practical exposure in any kind of business
organization last term of this program. This report has been prepared on practical orientation.
Rationale of the Study
Three types of schedule commercial banks are in operation in our economy. They are
Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private
Commercial Banks. PBL has introduced a new horizon in the field of banking area, consumer
credit scheme which offers loan to fixed income people. So I have decided to study on the topic
Consumer Credit Scheme of Prime Bank Ltd.. As the Internship program of the university
is an integral part of the BBA program, it is obligatory to undertake such task by the students
who desire to complete and successfully end-up their BBA degree. This also provides an
opportunity to the students to minimize the gap between theoretical and practical knowledge.
During the internship program the teachers of the department are attached to actively and
constantly guide the students. Students are required to work on a specific topic based on their
theoretical and practical knowledge acquired during the period of the internship program and
then submit it to the teacher. That is why I have prepared this report.
Scope of the Report
This internship Project Paper covers the Loans and Advance of the Prime Bank Ltd.
This report has been prepared through discussion with bank employees and with the customers.
While preparing this report, I had a great opportunity to have an in depth knowledge of the Loans
and Advance management activities practiced by Prime Bank Ltd. It also helped me to acquire
a firsthand perspective of a leading private Bank in Bangladesh. Specifically the report covers
the following areas:
Background of Prime Bank Ltd.
My Work Experience.
Consumer Credit Scheme of Prime Bank Ltd.
Methodology of the Study
The study is performed based on the information extracted from different sources collected by
using a specific methodology. This report is analytical in nature. The methodology is as follows.
Population: All the Branches of PBL located in everywhere in Bangladesh has been taken into
consideration as population. Special focus is given on Karwan Bazar Branch where I have
completed Project Paper.
Data collection: Source of data of this report can be divided into two categories:
Primary Sources
Conversations with officers & employees of the branch.
Interactions with the customers at PBL.
Face to Face conversation with the respective officers and staffs.
Sharing practical knowledge of officials.
Relevant file study provided by the officers concerned.
In-depth study of selected cases.
Secondary Sources
Annual Report of PBL
Audit Reports
Website of PBL
Internet and Study of selected reports.
Different Circulars of Bangladesh Bank.
Work procedure of the study in metaphorical arrangement:
Time Frame:
Time Frame:
The report has been prepared by taking 8 weeks.
Tasks \ Week 1 2 3 4 5 6
Preparing a Research Proposal

Developing Interview Guideline and Negotiation

Completion of Literature Review

Data Collection

Data Transcription

Data Analysis

Completion of Report Writing, Preparing Recommendation and Submission.

Problems faced:
During the time of conducting the report, the problems faced by me were as follows:
Only 8 weeks of internship was a limitation for the completion of an exclusive study and
to get in depth knowledge.
Preparation of the report before completing the scheduled time in the credit division.
Both the head office and the branch, the officials are preoccupied with their duties.
Most of the relevant information about the topic was secret from the view point of the
organization, so some of them were collected with a great difficulty.
Sufficient and updated records, publications, facts and figures were not available which
have narrowed the scope of real analysis.
Limitations of the Study
From the beginning to end, the study has been conducted with the intention of making it as a
complete and truthful one. However, many problems appeared in the way of conducting the
study. During the study, it was not possible to visit the whole area covered by the bank although
the financial statements and other information regarding the study have been considered. The
study considers following limitations:
All the branches of the bank were not physically visited.
All the concerned personnel of the bank could not been interviewed.
Lack of experience.
The time period for this study was short.
Inadequacy and lack of availability of required current data.
Historical Background of Prime Bank Limited:
The banking system plays a critical role in underpinning economic development. Against the
background of liberalization of economic policies in Bangladesh, Prime Bank Ltd. has resulted
in great success in all areas of operation of its bank with a view to improve the Socio-economic
development of the country.
Prime bank ltd. (PBL) was incorporated on 17
th
April 1995 with an authorized capital of Tk.
1000 million & Tk. 100 million of paid up capital by a group of successful entrepreneurs. It is
not a conventional Bank. Its a modern, dynamic private Commercial bank & plays a
constructive role in the economic development of the country. Prime Bank is the first private
bank to introduce lease finance, Hire Purchase & Customer Credit Schemes in the banking sector
in order to bring about qualitative changes in the lives of people of Bangladesh. PBL through its
steady Progress & continuous success has, by now, earned the reputation of begin one of the
leading private sector Banks of the country.
Vision of PBL:
To be the best Private commercial bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.
Mission of PBL:
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.
Objective & Goals:
PBL is ready to improve the highest quality customer service through new IT products &
services such as ATM. ONLINE BANKING & POINT OF SALES
transaction.
The Major objective of PBL is to maximize profit through customers satisfaction.
The bank plays a vital role in socio-economic development of Bangladesh by developing
worldwide network in domestic & international operations.
Salient features of PBL
Prime Bank is engaged in conventional commercial banking as well as Islamic banking
based on Islamic Shariah Principles.
It is the pioneer in introducing and launching different customer friendly deposit
schemes to tap the savings of the people for channel ling the same to the productive
sectors of the economy.
The Bank has introduced new software named T24 software, which is made by
Switzerland. It is used in Bangladesh for first time and has a lot of features to provide
prompt and smooth service for the customer of the Bank.
For uplifting the standard of living of the limited income group of the population, the
Bank has introduced Retail Credit Scheme by providing financial assistance in the form
of loan to the consumers for procuring household durables.
The Bank is committed to maintaining continuous research and development to keep
pace with modern banking.
The operations of the Bank are computer oriented to ensure prompt and efficient
services to the customers.
NETWORK OF BRANCHES
PBL is operating through 70 branches located in Dhaka, Chittagong, Khulna, Rajshahi, Sylhet,
Moulvibazar, Bogra, Jessore, Barisal, and Narayangong where there are Local branches along
with the Principal Branch in Dhaka.
1. 3. Gulshan
2. 4. Banani.
3. 5. Mouchak
4. 6. Bangshal
5. 7. Kawran Bazar
6. 8. Elephant Road
7. 9. Moulavi Bazar
8. 10. Mohakhali
9. 11. Dhanmondi
10. 12. New Eskaton
11. 13. Uttara
12. 14. Dhaka Club.
13. 15. Foreign Exchange
14. 16. Madhabdi Branch
15. 17. Pragati Sharani
16. 18. Mirpur-1 Branch
17. 19. Bashundhara
18. 20. Pallabi
19. 21. Asad Gate
20. 22. Shatmasjid Road
21. 23. Narayangonj Branch
22. 24. Ganakbari Branch
23. 25. Shimrail Branch
24. 26. Pragati Sarani Road
25. 27. Tongi Branch
26. 28. Panthapath Branch
27. 29. SBC Tower Branch
28. 30. Joyedebpur Chowrasta
29. 31. Tangail Branch
30. 32. Ashulia Branch
31. 33. Bijoynagar Branch
32. 34. Joypara Branch
33. 35. Adamjee EPZ Branch
34. 36. Gareeb-E-newaj Avenue Branch
35. 37. Bhairab Branch
36. 38. Mymensingh Branch
Corporate Organogram:
SERVICES:
PBL is offering 5 types of services. They are
Retail Banking
The Retail Banking Division comprises the domestic branch network with the specialized
customer credit, real estate finance. Retail banking deals with the banking services to the
individuals. Prime Banks retail banking strategy is aimed at keeping as closely in tune with their
customers needs as possible and further improving the quality of advisory services. As a result,
PBL offers different product ranges to different target groups. It includes the following:
Deposits Services: Individuals may open current, savings, STD, fixed deposit accounts.
Wage Earners Services: PBL offers a few innovative schemes to Bangladeshi wage
earners working overseas.
Customer Loans: PBL provides consumers loan services.
Institutional Banking
Prime Bank Limited offers various services to foreign mission, NGOs and voluntary
organization, consultants, airlines, shipping lines, contractors, schools, colleges, universities,
donor agencies and consultants.
The services include the following:
Deposit scheme
Current accounts in both Taka and major foreign currencies.
Convertible Taka accounts
Local and foreign currency remittances.
Various types of financing to cater to the banking requirements of multinational clients.
Corporate Banking
A professional account management team caters to the needs to corporate clientele and provides
a comprehensive range of financial services to national and multinational companies. Its services
include:
Corporate deposit accounts
Business lending
Merchant banking
Small and medium enterprises
Readymade garments
Projects finance investment, constancy and other finances.
Syndicated loans.
Local and international treasury products.
Bonds and guarantees.
Skilled and responsive attention to varying lending needs.
Commercial Banking
Being a commercial Bank PBL provides comprehensive banking services to all types of
commercial concerns. Some of the services are:
Trade finance
Issuing of import L/Cs.
Advising and confirming export L/Cs.
Bonds and guarantees.
Investment advice.
Project finance opportunities for import substitution and export oriented project.
Leasing: It is a very flexible arrangement, which is tailored to suit most requirements of
its clients. Lease financing by Prime Bank is a unique means of funding a firms need for
capital equipment without actually lending to the firm.
Correspondent Bank
Services to correspondent bank include:
Current accounts services where settlement is necessary.
Issue bonds and guarantees in support of their customer business.
Advise letter of credit and negotiation of documents.
Market intelligence and status report.
Management Hierarchy
Managerial decision-making authority starts from the Principal Officer. The top-level authority
goes to the Chairman, the Board of Directors and the Managing Director.
Field of operation
PBL, being one of the best financial intermediaries in the country, blended its operations in
conventional banking, Islamic banking and investment banking. The blending has been done
with the objective of diversifying the operations for catering to the needs of the customers of the
different strata of the society from one viewpoint and for having sustainable growth in
profitability and business with the least possible risk. The banks operations were diversified into
the following areas of activities as a dynamic financial intermediary.
Conventional Banking Operation
Islamic Banking Operation
Lease Finance Operation
Merchant Banking
Retail Banking
In order to carry out the above operations PBL has set up the following divisions,
departments and units in its Head Office:
1. Credit Operation & Management Unit
2. Corporate/Relationship Operation Department
3. Credit Risk Management Department
4. Credit Administration department
5. Credit Monitoring and Recovery Department
6. Export Finance Division
7. Small & Medium Enterprise (SME) Credit Cell
8. Structured Financing Unit
9. International Division
10. Treasury Division
11. Leasing Unit
12. Card Division
13. Retail Credit Division
14. Corporate Affairs Division
15. Islamic Banking Division
16. Merchant Banking & Investment Division
For facilitating operations by the above mentioned divisions the bank has established the
following divisions to provide support and internal services:
Human Resource Division
Information Technology Division
Public Relations Division
Financial Administration Division
General Services Division
Marketing Division
Prime Bank Training Institute
Branches Control Division
For ensuring internal and statutory compliance there are following three cells namely,
Board Audit Cell
Audit and Inspection Division
Central Compliance Department
Besides, there is a Board Secretariat to look after the company matters and to for arrange for
Board/Executive Meetings and record the proceeding of the board/EC.
If the memorandum and articles of association of the Prime Bank Limited is revised its area of
operation is clearly written. The product of PBL is targeted to fulfill that aim.
New Product and services
Online Banking Services
SWIFT services
L/C Delivery Services
Locker Services
Merchant Banking Services
ATM services
The bank has introduced Automated Teller Machine service to the client. The project will be
implemented with the share of other few commercial banks.
Performance & Growth of PBL: (In
Million Tk.)
Particulars 2004 2005 2006 2007 2008
Authorized Capital 1000 1000 1000 1000 4000
Paid-up Capital 500 600 700 1000 1400
Deposits 13259.87 16481.60 20483.23 28069.24 36022.46
Loans and
advances
9074.94 12686.85 16492.22 23219.67 31916.11
Net Profit before
tax after provision 705.09 696.84 769.91 1064.24 1200.83
Current ratio 1.06 1 0.88 0.97 0.95
Debt equity ratio 7% 7% 7% 7% 7%
Import 36747 40303 52639 70617 40303
Export 19502 28882 41801 51316 28882
Remittance 2140 3688 15050 15905 22669
Nonperforming
loans (NPLs) 352.73 308.21 367.15 777 1322.6
% of NPLs to total
loans and advances 1.52% 0.96% 0.82% 1.35% 1.76%
Earnings per share
(Taka) 96.6 59.73 37.55 43.71 40.59
Capital Adequacy
Ratio 17.50% 12.43% 11.90% 10.74% 9.96%
No of Branches 36 41 50 61 70
No of employees 894 1024 1172 1400 1550
From the table we can see that Prime banks net profit has increased from 705.09 million taka to
1200.83 million taka from 2004 to 2008. In 2004 there were only thirty six branches of Prime
Bank, by 2008 number of branches increased to seventy.
Graphical Presentations:
Graphical Presentation of Performance of PBL:
Investment Growth of PBL:
Year 2004 2005 2006 2007 2008
Tk(in Million) 1730.74 1996.23 2749.71 3083.81 3939.50
(Source: Annual Report)
From the graph we can see investment is continuously growing from 2004 to 2008.
Deposit Growth of PBL:
Year
2004 2005 2006 2007 2008
Tk.(in Million) 13259.87 16481.60 20483.23 28069.24 36022.46
From the graph we can also see deposit is continuously growing from 2004 to 2008. In 2004
deposit was 13259.28 million taka, by 2008 deposit increased to 36022.46 million taka.
Net Profit of PBL :
Year
2004 2005 2006 2007 2008
Tk. (in Lac) 9074.94 12686.85 16492.22 23219.67 31916.11
From the table we can see in 2004 net profit was 9074.94 Lac, it increases to 31916.11 Lac Tk.
by 2008. From the graph we can see continuous growth in net profit from 2004 to 2008.
Over View of the Study
Performance of Loans & Advance Scheme In Bangladesh
Introduction
Loans and advance Credit Program is an important development scheme in the banking sector in
most of the developing economies including Bangladesh. In Bangladesh people of limited
monthly income are faced with the problem of improving their standard of living. Considering
this, some commercial banks have started Consumer Credit Program especially since the mid-
1990s. The broad objectives of this scheme, among others, are to help service holders by
providing consumer credit at a reasonable rate of interest encouraging saving habit, developing
the saving habit, facilitating increasing standard of living and finally to play the active role in the
socio-economic development of Bangladesh. The middle class and the disciplined professionals
cannot afford to buy essential utility products at a time. As such, they cannot able to raise their
living standard to an expected level. Different private sector banks and foreign commercial banks
have introduced the household durable loan scheme known as Consumers Credit Scheme to
fulfill the dreams and desires of middle class fixed income group by providing loan to purchase
necessary products.
L&A in Bangladesh
Consumer Loans and advance Scheme is very much popular in most of the developed and
developing countries of the world. This is designed to finance the fixed income group for buying
essential commodities, which is to be repaid by monthly installment over a period in accordance
with a contractual agreement. Consumer Loans and advance Credit Scheme is becoming very
much popular in our country. A good number of financial institutions in our country are
successfully operating this program.
Islami Bank Bangladesh Limited first introduced this loan in 1993. Following their success other
private banks like Prime Bank Ltd., Uttara Bank Ltd., Pubali Bank Ltd., Mercantile Bank Ltd.,
IFIC Bank Ltd. and other introduced this scheme later. Now about to every private banks offers
this household durable loan. But among the foreign commercial banks this is not that much
practiced. But very few banks offer this loan extensively.
Loans of of Different private Banks
Name of Bank Name of Scheme Date of
Starting
Islami Bank Bangladesh Limited
Prime Bank Limited
Household Durables Investment Scheme
Consumers Credit Scheme
19931995
Social Investment Bank Limited
Pubali Bank Limited
Households LoanConsumers Credit
Scheme
19951996
Uttara Bank Limited
ANZ Grindlays Bank
Uttaran-Consumers Credit
SchemePersonal Finance
19961996
Arab Bangladesh Bank Limited
Al-Arafa Islami Bank Limited
Concumers Credit SchemeKengkhito
Samagri Biniog Prokalpo
19971997
Al- Baraka Bank
LimitedMercantile Bank Limited
Al- Baraka Consumer Credit
SchemeConsumers Credit Scheme
19971999
One Bank LimitedIFIC Bank
Limited
Consumers Credit SchemeIFIC
Consumers Credit Scheme
19991999
Premier Bank LimitedThe City
Bank Limited
Consumers Credit SchemeConsumers
Credit Scheme
19991999
From the table we can see that though Islami Bank Bangladesh Limited has was only offering
Household Durables Investment Scheme in 1993, But Prime Bank Limited has offered full scale
consumer credit first time in Bangladesh.
Objective of Loans Program
The main and specific objectives of Loan program in Bangladesh are:
To provide financial help for purchasing necessary goods
To improve the standard of living of middle class income group
To provide loan which can be repaid in some easy installments
To build up the habit of savings in limited income group
To contribute in the socio-economic development of the country
Goods under this Scheme
This Consumers Credit scheme program of different private sector banks is designed to provide
loans only for household durables and some intangible personal expenses purpose. The area for
which CCS loan is disbursed can be classified as bellow:
Vehicles: Car, Microbuses, Motorcycle.
o Domestic Appliances: Air conditioners, Fan, Refrigerators, Washing machine,
Microwave ovens, Cooking ranger, Knitting machine, Mobile, Telephone,
Furniture and others.
o Office Equipment: Personal computer, Printers, Photocopier, Generator, UPS,
Fax machine.
o Entertainment: VCD, VCR, TV, Music system, Camera.
o Intangibles: Holidays, Education, Medical, wedding expenses.
o Others: Home repair, Redecoration, Renovation etc.
Eligibility for Consumer loans
To be eligible for CCS loan different banks has different criteria. Some banks offer this loan to
each level of income group with every profession where others have some limited area for
disburse this loan. Most of the bans offer this loan to the following professions with an age range
of 18 to 60
Government organization.
Semi-government and Autonomous bodies.
Banks. Insurance Company and other financial institutions.
Armed force, BDR, Police and Ansar.
University, College and School.
Locally established and renounced Public Limited Companies.
Multinational Companies.
Bank acceptable Company.
Professionals Doctor, Engineer, Lawyer, Architect, Chartered Accountant,
Journalist, and self employed person etc.
Advance Schedule- PBL
ADVANCE AGAINST IMPORT BILLS (BLC)
Advance against Bills under Letter of Credit are originated from the lodgment of shipping
documents received from foreign banks against letter of credit established by the bank.
ADVANCE AGAINST IMPORTED MERCHANDISE (LIM)
Under loan against imported merchandise bank release the imported goods through the
nominated clearing agent of the bank. In this case bank holds the possession of the goods.
Importer takes delivery of the goods from the banks go-down against payment. It is one type of
forced loan.
ADVANCE AGAINST TRUST RECEIPT (TR)
Advance against Trust Receipt to the client are to release shipping documents for taking delivery
of merchandise which is hypothecated to the bank.
ADVANCE AGAINST EXPORT BILLS PURCHASED I DISCOUNTED
Discounting of bill: Banks allow advances to the clients by discounting bill of Exchange I
promissory note which matures after a fixed tenor. In this method, the bank calculates and
realizes the interest at a prefixed rate and credit the amount after deducting the interest from the
amount of instrument.
Purchase of bill: Banks also make advances by purchasing bills, instead of discounting, which
are accompanied by documents of title of goods such as bill of lading or railway receipts etc. In
this case the bank becomes the purchaser / owner of such bill which are treated as security for the
advance. This is allowed primarily relying on the credit worthiness of the client.
ADVANCE AGAINST WORK ORDER
Advance can be made to a client perform work order. The following points are to be taken into
consideration:
The clients management capability, equity strength, nature of the scheduled. Work and
feasibility study should be judiciously made to arrive at a logical decision.
If there is a provision for running bills for the work, appropriate amount to be deducted from
each bill to ensure complete adjustment of the liability within the payment period of the final
bill.
Besides assignment bills receivables, additional collateral security may be insisted upon.
Disbursement should be made only after completion of documentation formalities and
fulfillment of arrangements by the client to undertake the contract.
The progress of work under contract is reviewed periodically.
Non-Funded Business
Non flamed credit facility to a customer refers to a banks commitment to a third party on behalf
of the customer. The commitment itself constitutes facility but does not involve cash outflow
from the bank. The banks commitment essentially states that in the event of occurrence / non
occurrence of a particular event, within a particular date, due to a particular reason or reasons, a
specific sum of money shall be paid by the bank to the third party upon claim in a particular
manner. Though these types of facilities are primarily non-funded in nature but at times it may
turn into funded facility. As such liabilities against these types of credit facilities are termed as
contingent liability and do not affect the balance sheet of the bank at the time of commitment
but contain the possibility. The non funded facilities are:
Letter of Credit: A bankers documentary credit is an instrument or letter issued by a bank on
behalf of and for the account of the buyer of the merchandise. By this instrument the bank
undertakes that the bill(s) of exchange of the beneficiary (the seller of the merchandise) drawn
on the buyer, or on the issuing bank, or on another bank designated in the instrument, strictly
according to the conditions stipulated in the instrument, will be duly honored by acceptance and
by payment depending upon the issuance of the bill(s) of exchange in question.
A bankers letter of credit gives the seller or the exporter:
(a) Credit security- by eliminating the credit risk in the sale and the shipments of goods
(b) Credit facilities- by financing the sale when the goods are in transit; and
(c) Exchange security- by assuring him that the required amount is available to him under credit
from the time he receives the buyers order and the time of shipment and presentation of
shipping documents.
Guarantee: In banking, it is an irrevocable obligation of a bank to pay a certain sum of money
in the event of non performance of a contract by a third party. The basis of guarantee is always a
contractual relationship between principal debtor (account holder) and creditor (beneficiary),
which is either a contract that has been definitely concluded or a relationship in its pre-contracted
as is the case with the tender guarantee. This relationship is referred to as the principal or
underlying relationship or contract. The contract of guarantee is independent of this underlying
relationship.
SECURITY FOR LOANS AND ADVANCES:
Security is a Cover against loans and advances. It ensures recovery of loans and advances.
Though now-a-days greater emphases are put on the purpose of the loan rather than securities,
nevertheless the securities play an extremely important role to take a decision. Security is an
insurance or cushion to fall back upon in emergency if borrower fails to repay the loan amount.
Importance of charging security is:
i. Protection of Interest
ii. Ensuring the recovery of the money lent
iii. Provision against unexpected change
iv. Commitment of the borrower.
Types of Security:
The types of securities offered vary from place to place. In metropolitan cities, it may be Govt.
bonds / share I assignment of Book debt I Bills receivable etc. whereas, in the industrial area raw
materials & finished goods etc. may be offered as securities. Again agricultural produce is the
principal securities in the agricultural centers. Further, a bank also accepts moveable &
immovable properties, life insurance policy etc. as securities.
Securities are classified into three broad categories:
COLLATERAL SECURITIES: The tangible securities pledged I assigned by the borrower to
the bank and additionally held by the bank to secure a loan are called Collateral Securities. In
case of advances against pledge I hypothecation of goods, bank may insist on immovable
properties as collateral.
GUARANTEE: At times when the personal security of the borrower is not considered sufficient
or when the risk involved is a border line case and the borrower is not in a position to offer
sufficient collateral to the loan, the bank may ask for a guarantee of a third party whose financial
ability and credit standing is acceptable to the bank. A guarantee is an undertaking given to the
bank by a third party, called the guarantor to be answerable to the bank for the debt of the
borrower upon his default in repayment of the loan. It should be remembered that such security
for the loan depends on the continued solvency of the guarantor. To safeguard the banks interest
a continuing guarantee in the banks standard form should be obtained.
MARGIN: The difference between the market value / asset valued of the goods, merchandise
Consumer Loans Schemes of Prime Bank Limited
Bangladesh is a country having its population of above 140 million. When the world turns to be a
Global Village, 36% of our people live below the poverty line. In this situation when all other
banks are running after making profit, Prime Bank is committed to play a vital role in the overall
socio economic development of our country. As per its commitment, it launched Consumer
Credit Scheme in the Year 1995 to enhance the living standard of the people of limited and
fixed income.
Prime Bank tries to establish the concept of Relationship Banking. It treats clients as its
Financial Partner and always intends to be a friend of rainy days by means of proving financial
assistance in those days. Till the current fiscal period it provides financing for the following
purposes:
To purchase different home appliances
To purchase equipments for medical services
To purchase motor vehicles
To meet up emergency or sudden needs
To arrange marriage ceremony
To enjoy vacation both inward & outward of the country.
To bear the educational expenditures of children.
All of the above facilities were not available under the Consumer Credit Scheme, launched in
the year 1995. The new facilities are added with the Consumer Credit Scheme under the head of
the Retail credit Scheme. This new scheme has been introduced and came to effect from the 1
st

March 2004.
It is the ideal solution of customers needs. It is used to finance toward the people of fixed
income for purchasing various durable goods. The credit scheme is introduced with a set of
liberal terms as:
It is provided against personal Guarantee
It requires to a certain percent of equity investment
It is to repaid by equal monthly installment
It is to be repaid within a specific period.
objectives of Loans advance:
Prime Bank Limited started the Consumers Credit Scheme program with a view to fulfill its
beneficiary institutional objectives through financing the middle class limited income of prime
Bank Ltd. are bellow.
To bring the credit facility to the middle class limited income group.
To improve the living standard of limited income group through financing to purchase
necessary goods.
To participate in the socio-economic development of the country.
eligibility of the Customer
Any interested person with an age range of 20 to 50 and having a permanent job or officer of the
following organization can apply for the CCS loan of the bank.
Government organization.
Semi-government and Autonomous bodies.
Banks, Insurance Company and other financial institutions.
Armed force, BDR, Police and Ansar.
University, College and School.
Locally established and renounced Public Limited Companies
Multinational Companies.
Bank accepted Privet Company.
Professionals Doctor. Engineer, Lawyer, Architect, Chartered Accountant. Journalist
and self employed person etc.
Types of Consumer Loans
Car Loan: For many of us the most sought after dream is to own a car. As possessing a car is no
longer luxury but necessity. Prime bank offers the financial support by providing Car Loan
facility. The custom-design car loan with easy repayment schedules gives borrower the
opportunity to purchase a brand new or reconditioned car.
Eligibility: Prime Bank gives car loan to borrowers whose age is between 25 to 60 years.
Borrowers have to earn at least Tk. 20,000 per month if he/she is service holder, if
borrower is businessman his earning per month should be at least Tk. 40,000. Prime Bank
gives Car Loan to
Employees of:
Government, Semi Government, Autonomous bodies
Sector Corporation
Non-Government Organizations
Multi-national Companies
Banks & Financial Institutions
Educational Institutions
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Businessman ( At least five years of successful track record)
Loan Limit: Prime Bank gives loan up to Tk. 20, 00,000 for recondition and new car.
Loan period: In Prime Bank maximum loan period for car loan is 6 years.
Down Payment: Borrowers have to make 10% down payment in case of car loan.
Interest Rate: For car loan interest rate is 16%
Home Loan
Prime Bank offers customers an easy-to-avail Home Loan with convenient repayment options,
also with maximum limit on the loan amount.
Purpose of the loan:
Purchase of apartment/house (not older than 10 years)
Constructing a new home
Taking over of regular house building loans from other banks/non banking financial
institution.
Borrowers have to earn at least Tk. 20,000 per month if he/she is service holder, if borrower is
businessman his earning per month should be at least Tk. 40,000. Prime Bank gives Home Loan
to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 50, 00,000 for home loan.
Loan period: In Prime Bank maximum loan period for home loan is 20 years.
Down Payment: For home loan down payments differs as per purpose. If home loan is for
building a house down payment will be maximum 60%, if home loan is for buying
apartment or house the down payment will be maximum 70%, if home loan is for buying
old apartment or house the down payment will be maximum 50%.
Interest Rate: For home loan interest rate is 16%
Education Loan: Now-a-days to give your child the best education or to get a higher degree
either at home or abroad requires a substantial amount of finance. To relieve from this burden
prime bank offers education loan that ensures uninterrupted study through steady flow of cash.
Borrowers have to earn at least Tk. 12,000 per month if he/she is service holder, if
gives Education Loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 5, 00,000 for education loan.
Loan period: In Prime Bank maximum loan period for education loan is 4 years.
Down Payment: Borrowers have to make 20% down payment in case of education loan.
Interest Rate: For education loan interest rate is 17%
Travel Loan:When planning an overseas vacation or making a trip to chosen exotic location,
financing may be the key issue. To resolve this problem Prime Bank came up with the travel loan
offer.
Eligibility: Prime Bank gives travel loan to borrowers whose age is between 25 to 60
years. Borrowers have to earn at least Tk. 20,000 per month if he/she is service holder, if
gives travel Loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 2, 00,000 for travel loan.
Loan period: In Prime Bank maximum loan period for travel loan is 3 years.
Down Payment: Borrowers have to make 20% down payment in case of travel loan.
Interest Rate: For travel loan interest rate is 17%
Marriage Loan:
Trying the martial knot is an event of a life time and its celebration and memories should last
forever. Prime Bank offers marriage loan which enable borrower to organize and celebrate the
marriage in style.
gives marriage Loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 3, 00,000 for marriage loan.
Loan period: In Prime Bank maximum loan period for marriage loan is 3 years.
Down Payment: Borrowers have to make 20% down payment in case of marriage loan.
Interest Rate: For marriage loan interest rate is 17%
Doctors Loan: As part of the global phenomenon, medical profession is changing fast. With
this ever changing environment, ground breaking products and equipments are coming to the
market. In a country like ours it is to be at par with that change. Keeping that in mind and with a
vision to support and promote health services, Prime Bank has introduced Doctors Loan. This
easy and flexible loan is designed to provide financial support to noble professionals for
purchasing medical equipments and to furnish their own chambers.
Eligibility: Prime Bank gives doctors loan to borrowers whose age is between 25 to 65
years. Doctors have to earn at least Tk. 10,000 per month if he/she is service holder, if
doctor is self employed his earning per month should be at least Tk. 25,000 to take
Doctors loan.
Loan Limit: Prime Bank gives loan up to Tk. 5, 00,000 for doctors loan if he/she is
general practical and if doctor is post graduate (Specialist) Prime Bank gives loan up to
Tk. 10, 00,000.
Loan period: In Prime Bank maximum loan period for Doctors loan is 5 years.
Down Payment: Borrowers have to make 10% down payment in case of Doctors loan.
Interest Rate: For Doctors loan interest rate is 17%
Hospitalization Loan:
Crisis comes without warning and well-being comes at a price. For this reason Prime Bank
provide quick and convenient hospitalization loan for all medical emergency. With easy
repayment option through equal monthly installments Prime Bank provide loan service in time of
crisis.
Eligibility: Prime Bank gives hospitalization loan to borrowers whose age is between 25
to 65 years. Borrowers have to earn at least Tk. 12,000 per month if he/she is service
holder, if borrower is businessman his earning per month should be at least Tk. 25,000 (If
live in rental house). Borrowers have to earn at least Tk. 10,000 per month if he/she is
service holder, if borrower is businessman his earning per month should be at least Tk.
15,000 (If live in own resident). For Government, Semi Government, Autonomous
bodys monthly incomes have to be at least Tk. 10,000. Prime Bank gives education loan
to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 5, 00,000 for hospitalization loan.
Loan period: In Prime Bank maximum loan period for hospitalization loan is 2 years.
Down Payment: Borrowers have to make 20% down payment in case of hospitalization
loan.
Interest Rate: For hospitalization loan interest rate is 17%
Loan Against Salary:
Life is full of surprises. We often tumble into unforeseen cost that leaves us especially the fixed
income people unprepared. To face this unpredictability in life Prime Bank has introduced Loan
against Salary scheme. This scheme tailored to provide loan to fixed income people against
their salary to mitigate any emergency.
Eligibility: Prime Bank gives loan against salary to borrowers whose age is between 21 to
65 years. Borrowers have to be at least one year in a job. Borrowers have to earn at least
Tk. 12,000 per month if he/she is service holder, if borrower is businessman his earning
per month should be at least Tk. 25,000 (If live in rental house). Borrowers have to earn
at least Tk. 10,000 per month if he/she is service holder, if borrower is businessman his
earning per month should be at least Tk. 15,000 (If live in own resident). For
Government, Semi Government, Autonomous bodys monthly incomes have to be at
least Tk. 10,000.Prime Bank gives loan against salary to
Employees of:
Sector Corporation
Loan Limit: Prime Bank gives loan up to Tk. 3, 00,000 for loan against salary. Borrower
gets loan amount to eight times of his/her gross salary if he has salary account in Prime
Bank. For the borrowers who have salary account in other banks gets loan amount to six
times of his/her gross salary.
Loan period: In Prime Bank maximum loan period for loan against salary is 3 years.
Down Payment: Borrowers dont have to make any down payment for loan against
salary, just have to pay 1% service charge and 1% security.
Interest Rate: For loan against salary interest rate is 17%
Household Durables Loan:
There are some household products which makes our life easy and comfortable like Refrigerator,
Micro-oven, Air condition, Television, Furniture etc. Prime Banks consumer loan provides the
ideal solution for these needs. Raging from household appliances and furnishing to life style
products for leisure and entertainment, household durables loan offer the convenience people
looking for.
borrower is businessman his earning per month should be at least Tk. 25,000 (If he/she
owned residence than 15,000 per month). Prime Bank gives household durables loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 5, 00,000 for household durable loan.
Loan period: In Prime Bank maximum loan period for household durable loan is 4 years.
Down Payment: Borrowers have to make 20% down payment in case of household
durable loan.
Interest Rate: For household durable loan interest rate is 17%
Any Purpose Loan:
Necessity and needs are constantly changing phenomena in our efforts to improve the quality of
life. That necessity cannot always wait for peoples savings to accumulate. To take care of
peoples financial needs, Prime Bank offers any purpose loan which is a type of consumer credit
scheme.
Eligibility: Prime Bank gives any purpose loan to borrowers whose age is between 25 to
65 years. Borrowers have to earn at least Tk. 10,000 to 12,000 per month to get any
purpose loan from Prime Bank. Prime Bank gives any purpose loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 3, 00,000 for any purpose loan.
Loan period: In Prime Bank maximum loan period for any purpose loan is 3 years.
Down Payment: Borrowers dont have to make any down payment for any purpose loan,
just have to pay 1% service charge and 1% security.
Interest Rate: For any purpose loan interest rate is 17%
CNG Conversion Loan:CNG is a kind of fuel which is cheap and environment friendly.
Vehicles run by oil cost more than CNG. As a result CNG driven vehicles became popular.
Many car owners want to convert their engine from oil to CNG. But it requires a lump sum
amount not more than one lac taka. To finance this conversion Prime Bank offer CNG
conversion loan.
Eligibility: Prime Bank gives CNG conversion loan to borrowers whose age is between
21 to 65 years. Borrowers have to be at least one year in a job. Borrowers have to earn at
least Tk. 12,000 per month if he/she is service holder, if borrower is businessman his
earning per month should be at least Tk. 25,000 (If live in rental house). Borrowers have
to earn at least Tk. 10,000 per month if he/she is service holder, if borrower is
businessman his earning per month should be at least Tk. 15,000 (If live in own resident).
For Government, Semi Government, Autonomous bodys monthly incomes have to be at
least Tk. 10,000.Prime Bank gives CNG conversion loan to
Employees of:
Sector Corporation
Professionals:
Doctor
Engineer
Accountant
Self Employed:
Loan Limit: Prime Bank gives loan up to Tk. 1, 00,000 for CNG conversion loan.
Loan period: In Prime Bank maximum loan period for CNG conversion loan is 1.5 years.
Down Payment: Borrowers have to make 20% down payment in case of CNG conversion
loan.
Interest Rate: For CNG conversion loan interest rate is 17%
Consumer Loans administration
The retail credit unit handles consumer credit scheme. The Unit is established and placed at the
head office under the credit division. The unit is headed by the senior executive supported by a
team consisting of a numbers of officers.
Functions of Retail credit and Loans unit:
1. The unit makes agreement with the well-reputed, reliable suppliers for supplying their
products under this scheme.
2. They operate marketing of Consumer Credit Scheme by acting as a team.
3. They evaluate the loan proposal in respect of:
a) Cash flow or income to service the loan.
b) Pre finance inspection of the applicants and the guarantors premises.
1. They make follow up, monitoring, supervision recovery of the problematic cases.
2. They also supervise recovery position, revise credit portfolio, take action plan, and guide
the branches time to time.
Documents Needed For Credit Loans:
For execution of CCS loan Prime Bank usually use two types of documents. One is application
from and other is clear document, detail of these documents is given bellow.
Application Form
The contents of application form for CCS loan of different banks are about to same and as
follows:
1. Personal Details of Applicant(s): In this section all about the application will have to
write down specially.
2. Employment Details: This is the section where the applicant have to specify the name of
organization where he/she engage, designation, years of engagement, salary and soon.
3. Loan Details: Here amount of loan, Period, interest, consumers equity mode of
repayment, security and other charges are to mention.
4. Financial Details: Total assets, total liability monthly income, month expenses and all
others financial details of the applicant are to mention here.
5. Particulars of Guarantors: All details about the guarantor(s) and his/her job
descriptions are to mention in this section.
6. Quotation: Quotation contains the detail description of the goods/items-brand, model
size manufacturer, price and details of supplier.
7. Letter of Assurance: This is the assurance of the working organization of the client that
in any case if the borrower fails to pay the installments the organization will fill it up.
8. Declaration: This is the declaration of the borrower that all the information regarding the
quotation of goods is correct and he/she agrees with all terms and condition of the bank.
9. Certification of the Organization: In this section the working organization will certify
that the borrower is the employee of the organization.
10. Photograph: Two copies of photograph are required for each consumer.
Charge Documents
Charge documents are stamped documents, which contains different rules, terms and conditions.
If the borrower of CCS loan is agreed upon all these terms and conditions regarding the loan
he/she with need to sign the documents. If any disagreement or irregularities occur in future this
documents are sued to remedy situation.
Before disbursing the CCS loan, the following documents must be completed by customers/
borrower. On these documents the stamp is needed for legislative reasons, which is paid by
borrower.
1. Letter of Guarantee: This letter of guarantee is two sided- one is borrower side
guarantee and other is guarantor side guarantee. Borrower side guarantee consists of agreement
of all terms and condition of bank as well as assurance of proper and repayment of installment in
case of failure of the client.
2. Letter of Hypothecation: In conations the terms and condition CCS loan and
borrower is hypothecated for equipment.
3. Demand Promissory Note: In is a promise of borrower to pay on demand to the
bank
4. Letter if Installment: In this document borrower promise to pay all regular and
irregular installments in nay time.
5. Letter of Disbursement: This is the declaration of disbursement of loan to the
borrower.
6. Letter of Agreement: This is the agreement of borrower that he/she is bound to
pay all dues together with all other charges and given the bank the authority to discharge the
agreements any time due to the fault in borrower side.
7. Letter of Authority: This is the given authority of the borrower to the bank to debit
his/her account in necessary.
Judgment of the process Loan Policy:
Loans and advances are the main form of assets of a bank. It is so crucial for any bank because it
generates the greatest part of revenue for a bank. Within the total credit portfolio Consumer
Credit is the most popular form of credit because it is unsecured. As it is totally unsecured it
requires a great extent of prudent judgment. By applying the most common form of analytical
tool like financial statement analysis and the ratio analysis, the credit worthiness and
trustworthiness cannot be evaluated properly. This is why credit unit have to apply additional
subjective judgment in this course of action. The credit officer has to verify the potential
borrowers income, expenditure pattern type of service to select the appropriate borrower the
factors, which are considered in this process, are as stated here:
1) Borrowers Income: It is the vital factor for selecting a borrower. To gather required
information in this regard the borrow is requested to allow the credit officer to verify the
following subject natters:
a) Place of employment
b) The stated salary
c) The continuity of existing job
For a permanent employee it can be verified from the concerned employer. But if the potential
borrower engages with several jobs, then it becomes difficult. Other informations which are
required to be verified to identify the proper income source and amount. Those are:
a) Income from part time employment
b) Spouse income
c) Income from rentals
d) Dividend or interest
e) Childrens support
Besides these the credit officer also verifies a borrowers income from the TIN certificate, Tax
return, Salary statement.
2) Estimated Housing Expenses: The credit officer tries to evaluate the expenditures pattern as
well as monthly living expenditure with the help of the following informations:
a) Childrens education expenditure
b) House rent
c) Interest payment for other borrowings
d) Interest payment for the loan which is under consideration
If the total amount of expenditure becomes higher than total income, then the concerned credit
proposal is to be rejected.
3) Location: The location of the borrower is an important factor for selecting any borrower. If
the location the borrower is far from the bank, then the physical communication becomes tough
for the part of the bank. This becomes crucial In case of the default loan, because the regular
follow up becomes impossible. So Prime Bank likes to provide loan to those borrower who stays
near to the banks branch.
4) Assessment of credit history: The credit officer tries to evaluate the credit history of a
potential borrower with help of the CIB report and by asking his or her business community.
5) Social status: Social status of a borrower is to be verified from the following information:
a) Ownership of a car
b) Ownership of a house in the metropolitan area
c) Holding a land phone in residence
d) Holding passport, TIN certificate
e) Membership of a first class club
f) Marital Status
If the borrower can meet the above criteria the he or she gets favored in case of having loan
under the Consumer Credit Scheme.
6) Guarantors status: Under the Consumer Credit Scheme credit is to be offered by taking a
personal guarantee form a third party. Prime Bank takes guarantee from the spouse of the
borrower and from another officer. The guarantor will liable for the remainder of the loan in case
of defaulter. So the credit officer tries to verify the guarantors designation, type of job, monthly
salary, period of service, office address, and the consent of the guarantor regarding this mater.
7) Loan pricing and payment pattern: Loan pricing is a very important mater in banking
business. Under the Consumer Credit Scheme, the loan is to be priced at a fixed interest. If the
borrower provides a security equal to the 50% of the loan amount, the interest rate is to be
reduced by 1%
Besides the above source of information Prime Bank evaluate the status of potential borrower
from taking clearance from the police, lawyer, and journalist. After gathering information
regarding a borrower fro then above source the credit officer applies his or her subjective
judgment to evaluate a particular borrower.
Numerical judgment for selecting a borrower
Under the Consumer Credit Scheme the Bank is dealing directly with the borrowers, and
provides unsecured loan to them so should apply some numerical judgment to select a particular
borrower. In this regard Prime Bank uses numerical credit scoring model.
Under this model the potential borrower is asked a set of question at the beginning of processing
of loan proposal. The answers are then scored based on the standard value previously set to
scorer a loan application. Based on the scoring a credit proposal is stated to process further or
refused. The total cost of credit processing is to be reduced by two-third just because of applying
this model. The variables, which are used to score under this model, are:
Variables Score (absolute or
range)
Salary of the applicant if it is fixed 5
Income of professionals 3
Monthly cash flow of the applicant 30 to 60
Ownership of the car 3
Ownership of a house in the metropolitan area 3
Holding a land phone at the residence 2
Being a customer of Prime Bank and availed another
credit facility earlier and paid perfectly
3
Other income source or spouse income 3
Guarantors status 2
Social status and reputation of the applicant 3
Holding of passport 1
Income tax payer 2
Member of any first class club 1
Form of security if it is FDR or any other govt. saving
instrument
10
Reputation of the suppliers from whom the applicant wish
to have the cherished products
2
Based on the scoring a benchmark range of score is to be fixed and a limit of loan is to be fixed
base on the range, which is given below:
The total scoring is calculated based on a cumulative value of 100.
Applicable for Consumer Credit: (Out of Total value 100)
Range of Score Limit of credit which can be offered (in BDT)
35 to 37 20000 to 25000
38 to 40 25000 to 30000
41 to 43 30000 to 40000
44 to 46 40000 to 50000
47 to 50 50000 to 70000
51 to 54 70000 to 80000
55 to 58 80000 to 90000
59 to 61 90000 to 100000
62 to 65 100000 to 150000
65 to 70 150000 to 200000
70+ 200000 to 300000
Applicable for Car loan: (Out of Total value 100)
60 to 65 250000 to 300000
66 to 70 300000 to 500000
71 to 75 500000 to 700000
76 to 80 700000 to 1000000
81 to 85 1000000 to 1200000
85+ 1200000 to 1500000
Applicable for Doctors loan: (Out of Total value 100)
50 to 55 100000 to 200000
55 to 60 200000 to 300000
60 to 65 300000 to 400000
65 to 70 400000 to 500000
70 to 80 500000 to 600000
80 to 85 600000 to 800000
85+ 800000 to 1000000
Applicable for Home loan: (Out of Total value 100)
50 to 55 1000000 to 1500000
55 to 60 1500000 to 2000000
60 to 65 2000000 to 2500000
65 to 70 2500000 to 3000000
70 to 80 3000000 to 3500000
80 to 85 3500000 to 4000000
85+ 4000000 to 5000000
Applicable for Travel loan: (Out of Total value 100)
35 to 37 20000 to 25000
38 to 40 25000 to 30000
41 to 43 30000 to 35000
44 to 46 35000 to 40000
47 to 50 40000 to 45000
51 to 54 45000 to 50000
55 to 58 50000 to 65000
59 to 61 65000 to 80000
62 to 65 80000 to 100000
65 to 70 100000 to 150000
70+ 150000 to 200000
Applicable for Education loan: (Out of Total value 100)
60 to 65 50000 to 100000
66 to 70 100000 to 150000
71 to 75 150000 to 250000
76 to 80 250000 to 300000
81 to 85 300000 to 400000
85+ 400000 to 500000
Applicable for Hospitalization loan: (Out of Total value 100)
60 to 65 50000 to 100000
66 to 70 100000 to 150000
71 to 75 150000 to 250000
76 to 80 250000 to 300000
81 to 85 300000 to 400000
85+ 400000 to 500000
Applicable for Marriage loan: (Out of Total value 100)
35 to 37 20000 to 25000
38 to 40 25000 to 30000
41 to 43 30000 to 40000
44 to 46 40000 to 50000
47 to 50 50000 to 70000
51 to 54 70000 to 80000
55 to 58 80000 to 90000
59 to 61 90000 to 100000
62 to 65 100000 to 150000
65 to 70 150000 to 200000
70+ 200000 to 300000
Applicable for Loan against Salary: (Out of Total value 100)
35 to 37 20000 to 25000
38 to 40 25000 to 30000
41 to 43 30000 to 40000
44 to 46 40000 to 50000
47 to 50 50000 to 70000
51 to 54 70000 to 80000
55 to 58 80000 to 90000
59 to 61 90000 to 100000
62 to 65 100000 to 150000
65 to 70 150000 to 200000
70+ 200000 to 300000
Applicable for Household Durable loan: (Out of Total value 100)
60 to 65 50000 to 100000
66 to 70 100000 to 150000
71 to 75 150000 to 250000
76 to 80 250000 to 300000
81 to 85 300000 to 400000
85+ 400000 to 500000
Interests and Other Charge
Prime Bank Ltd. charges interest service and risk fund for the CCS loan. The rate of these
interest and charges are as bellow.
Interest: 15% simple rate of interest yearly.
Risk Fund: 2% of loan amount
Service charge: 1% of loan amount
Stamp charge: Tk. 500
Application Form: Tk. 10 each
Risk fun and service charge are one time, which will be collected at the time of sanctioning of
the loan, which are not refundable.
Mode of Repayment
The loan of Prime Bank Ltd. is adjusted by monthly installment started from the following
month of disbursement of the loan. The borrower has to deposit advance dated cheques against
all installments which to be presented in the concerned bank with in the first week of each month
towards adjustment of monthly installment. However, the customer can pay installments even
before due date, If the account contain insufficient fund only then the borrower will pay
installment in cash with in the first week of the month.
Securities and Documents
The borrowers with submit the agreement paper to pay the monthly installment properly. For the
Government employee semi-government, autonomous bodies, bank, insurance companies and
other financial institution, defense; and teachers the guarantors will be the senior officers. For
other types of customers the bank will accept same amount of bank guarantee or insurance
guarantee. For private organization the guarantors will be the head (employer) of the
organization and a bank accepted personal having a high social status. For professionals, the
guarantors will be a senior one of same profession and a bank accepted personal having a high
social status.
Except these any person who is competent and eligible for the loan can apply for the loan by
depositing Bangladesh Wage earners development bond, fixed deposit receipt etc to the
concerned bank.
The following charge documents are required for the CCS loan Prime Bank Limited.
1. Demand Promissory Note
2. Letter of Agreement
3. Letter of Hypothecation
4. Letter of Guarantee
The clients have to provide the following documents to get under the Consumer Credit Scheme:
1. Salary certificate
2. Letter of introduction from the employer
3. Salary statement for three months
4. Evidence of other income source
5. TIN certificate (If had)
6. Copy of Tax return (if had)
7. Copy of current Trade license for business man
8. Personal Bank statement for business people
Other Relevant Conditions
Client will bear all necessary expenses relating to license, registration, insurance etc, of the
goods supplied.
The client will use the goods with ultimate care and he will be liable to pay for any damage to
the goods.
The client is bound to allow the banks authorized agent and representatives to inspect good as
and when required.
The client must keep the branch abreast and informed about any change in his of and residential
address.
Steps Taken Against Defaulters
If a borrower fails to pay 3 installments consecutively then he/she will be considered as
defaulter. Prime bank Ltd. usually follows the following guideline for treatment of its overdue
installments.
Telephone contact
Cheque bounce letter
Overdue recover letter
Letter to guarantors
Letter to authority
Legal notice to borrower and guarantor suit notice.
Prime bank Limited in these contexts is very much successful. It started the CCS operation from
the beginning of its banking operation with keeping a separate cell to deal and look after the
program in each branch. The bank to be the pioneer in the field of consumer credit scheme
program as it is in the field of banking operation.
Loan and Advance Execution Process:
Loans and advance Scheme program Prime Banks is executed based on its policy. Though the
policy may differ from bank to bank, but the main framework of this program is about to same.
The overall process of this scheme is describing step wise in the following.
1. Application: First of all, the customer comes to the bank and pursue for the loan to
purchase the desired goods/item. Bank then inspect and verify about the applicant, if the bank
considers the applicant suitable and competent for the loan bank sell an application form to the
applicant at a price of Taka 500, after submission of the application form with proper filling up
main process of the loan started.
2. Amount of Loan and Duration: The amount of loan varies among types of Customer
Loan. Different types of Credit Loan offer different amount of money and different time. Usually
the ceiling of Credit loan is higher for car and home loan. This loan is disbursed for the period of
l to 20 years duration. The time period of installment depends on the amount of loan.
3. Security: For Credit loan Prime Bank doesnt demand any kind of monetary security or
mortgage. The only security for this loan is guarantor of the borrower. This guarantor may be
one person or may be two as the bank demand. The duty of this guarantor (s) is to give the
assurance to the bank that if in any case the borrower fails to pay the installment he/she
(guarantor) with be liable for the whole amount. This Guarantor (s) must be acceptable to the
bank.
4. Down Payment: Down payment or the borrowers equity of the total loan differ from bank
to bank. This down payment means that the borrower has pay a certain percentage of total price
of the commodity before disbursement of the loan. This percentage is between 10 to 50 percent
for different type of Credit Loan. The borrower has to open an account in the bank where the
down payment amount and installment are deposited.
5. Interest & Other Charges: Interest on Credit loan differs among different schemes. The
amount of interest on loan, which is charged by the Prime Bank, is ranged from 16% to 17% per
year. Prime Bank charges penalty interest for the defaulters. Other charges include service
charge and risk fund, which is 1% each.
6. Repayment Process: The CCS loan is to pay through monthly installment with interest, as
the bank determines. The first installment begins from after the following month of the
disbursement of loan. Every installment is to pay with in the first week of the month, otherwise
many banks advance cheques for each installment to the bank.
7. Other Conditions: Prime Bank executes this CCS program following the above mention
systems and the borrower is bound to agree all the terms and conditions of the respective bank.
The borrower is responsible for the goods. After disbursement no excuse will be allowed about
the products. Bank has the right to the borrower, it will given to the supplying firm through a
crossed pay order and the borrower with acknowledge the bank in any change of his/her
habitation and job.
Consumers Credit Scheme is becoming popular day by day in our country especially to middle
class fixed income group, who have a dream and desire but have not sufficient financial support.
Loan sectioning process:
The officer of the retail credit unit pursue the prospective customer to take the retail asset
product
The customer may submit the loan application directly to the retail credit unit or to any nearest
branches of Prime Bank as convenience.
After receiving the credit application from the customer the branch forward it to retail credit
unit immediately.
Then the retail credit unit inspect and verify the information provided by the customer in the
credit application and apply al due diligences for approval or declining the loan.
If the retail credit committee approves the proposal, section advice is issued to the customer and
asked to finish all other documentation and to give the required number of post date cheques.
Both the Retail credit unit and branches keep the record of approved and declined loan
proposals.
Monitoring and Recovery
Monitoring and supervision are the main methodology for collecting the loan. This is a stepwise
process:
The branches maintain the record of the date of payment of monthly installments
The branches place the cheques to the particular bank in the appropriate date.
The unit member remainder notice to the customer 10 days before the due installment
If the installment money is not deposited after the 2
nd
or 3
rd
remainder notice then the brace
officer visits the customer personally.
The classified loans are referred to retail credit unit to take required steps.
Loan amortization
Prime Bank uses the most common loan amortization method the=at is Capital recovery
method. Under this method constant monthly payment is calculated on an original loan amount
at affixed rate of interest for a given term.
Example:
Loan amount = BDT 100000 (PV)
Interest rate = 15% (r)
Number of installments monthly=24 months
So monthly Installment will be: PV/ (MPVIFA* @15%, 24 months)
Giving the value we get: 100000/20.62423451 = Taka 4848.66/month.
*MPVIFA= monthly present value annuity factor.
Amortization schedule
Month
(1)
Beginning
Balance (2)
Monthly
interest
(3)(.15/12)
Monthly
amortization
(4)(5-3)
Monthly
payment
(5)
Ending
Balance (6)
1 100000 1250 3598.66 4848.66 96401.34
2 96401.34 1205.02 3643.65 4848.66 92757.69
3 92757.69 1159.47 3689.19 4848.66 89068.49
4 89068.49 1113.36 3735.31 4848.66 85333.18
Findings: From the table is to be noticed that in the early payment interest amount is greater.
Interest amount is reducing at a very slow rate in the beginning stage and it start to increase with
the following installment. As the loan approaches to the maturity the fraction of principal is
growing at a high rate.
The payment pattern is established for the welfare of both the bank and borrowers. As the
payment remains equal throughout the loan period, more people of fixed income can qualify for
this loan.
On the other hand bank is convinced because of the fact that the income of the borrower is
increasing over time, so default risk is reduced by means of using this method of amortizing.
Prepayment:
Customers can repay the loan before maturity of the loan. In case of early payment bank has to
face reinvestment risk. That is from the early payment of a loan bank gets an unanticipated fund
that may or may not be invested at the previous rate, because interest tends to decline over time
because of the growing competition among banks. But Prime Bank usually welcomes the early
repayment of loan and offers a rebate of interest amount as well as no prepayment penalty is to
be charged like other banks. The reason behind this is that Prime Bank tries to avoid classified
loan even at the cost of losing some profit and receiving risk just to maintain its credit history
and good CAMEL rating.
Loan Classification
If any customer failed to repay the loan within the fixed time period, the loan may be treated as
classified loan. The portion of loan which is not paid within the time is known as overdue.
Overdue means:
Continuous Loan is not renewed or repaid within expiry date, the treat of overdue from the
following day of expiry date.
Demand Loan is not renewed or scheduled within expiry date, the treat of overdue from the
following day of expiry date.
According to Bangladesh Bank Circular, Loans & Advance are classified in the following
manner.
SMA (Special Mention Account): Overdue period 90 days or more.
For Continuous Loan:
Sub Standard: Overdue 6 Months or beyond but less than 9 months
Doubtful: Overdue 9 Months or beyond but less than 12 months
Bad/Loss: Overdue 12 Months or beyond
Fixed Term Loan (Within 05 Years):
Sub Standard: Defaulted installment is equal or more than the amount of installment within 6
months.
Doubtful: Defaulted installment is equal or more than the amount of installment within 12
months.
Bad/Loss: Defaulted installment is equal or more than the amount of installment within 18
months.
Fixed Term Loan (More than 05 Years):
Sub Standard: Defaulted installment is equal or more than the amount of installment within 12
months.
Doubtful: Defaulted installment is equal or more than the amount of installment within 18
months.
Bad/Loss: Defaulted installment is equal or more than the amount of installment within 24
months.
Maintenance of Provisions:
1) 1% against all unclassified loans.
2) 1% on the unclassified amount od Small Enterprise Financing
3) 5% on unclassified amount of consumer Financing
4) 5% for SMA
5) 20% of Substandard
6) 50% of Doubtful
7) 100% for Bad/Loss
Rescheduling
To reschedule loans the bank shall examine the following:
Causes as to why the Loan has become non-performing
Has diversion of Loan taken place?
Is the defaulter a habitual one?
If the answer is yes, the bank shall take all legal steps for recovery.
Bank must assess:
1) Borrowers overall repayment capacity taking into account the borrowers liability position
with other bank.
2) Review the borrowers cash flow statement, audited balance sheet, income statement &
other financial statement.
3) Bank officials may visit the borrowers business place.
4) If it is proved that the borrowers will not be able to repay, the bank shall all legal steps to
realize the loan, make necessary provisions and take measures to write off.
5) The rescheduling shall be for the minimum reasonable period of time.
6) In the approval process, the Bank shall apprise the Board of the implications of such loan
rescheduling on the income and other areas of the bank.
Down Payment for Rescheduling:
For Term Loans:
Cash payment at least 15% of the overdue installments or 10% of the outstanding amount of
loan, whichever is less.
Rescheduling for second time will require Cash payment at least 30% of the overdue
installments or 20% of the outstanding amount of loan, whichever is less.
For more than twice, Cash payment at least 50% of the overdue installments or 30% of the
outstanding amount of loan whichever is the lesser amount.
For Demand & Continuous Loan:
For up to Tk. 1 Crore of overdue, down payment is 15%
For Tk. 1 Crore to 5 Crore of overdue, down payment is 10% (but not less than Tk. 15.00 Lac)
For Tk. 5 Crore and above of overdue, down payment is 5% (but not less than Tk. 50.00 Lac)
If rescheduled by restructuring converting party or wholly into Term Loan and repayment
installments have been fixed,
Cash payment of minimum 30% of the overdue installments or 20% of the outstanding amount
of loan, whichever is less.
For subsequent rescheduling minimum 50% of the overdue installments or 30% of the total
outstanding amount of the loan amount shall have to be deposited in cash.
Trend Analysis
Classified Loan & Advance against Total Disbursed Loan Amount (2004-
2008)
Year 2004 2005 2006 2007 2008
Total Loans &
Advances(Lac)
232197 319161 449710 576102 751562
% of Classified
Loan
1.52 0.96 0.82 1.35 1.76
Classified Loan
Amount(Lac)
3527.3 3075.94 3671.51 7772.16 13226
From the table we can see that in 2004 the total loan amount & advances was 232197 Lac, by
2008 which increased to 751562 Lac. In 2004 classified loan amount was 3527.5 Lac which was
1.52% of total loan amount & advances, has increase to 13226 Lac which was 1.76% of total
loan amount.
From the table we can see in 2008, total outstanding loan was 751562 Lac of which 13226 Lac
was classified. This classified amount is categorized as sub standard which is 2631.23 Lac,
default is 5617.83 Lac and Bad & Loss is 4926.94 Lac. It can be said from table that in 2008,
0.35% of total outstanding loan is sub standard, 0.75% is default and 0.66% is bad & loss.
Sector-wise Classified Loan as on 31.12.08
(Amount in Lac)
CCS SME Construction Trading Spinning
/Textile/
Dyeing
Media Import of
Fertilizer/
Rice/Flour
Transport Other Credit
Card
2027.32 322.2 23.27 416.95 1568.29 3391.26 0.00 122.19 5250.08 394.42
From the table we can see that in 2008, amount of CCS classified loan was 2027.32 Lac, which
was the second biggest amount of sector-wise classified loan.
Graphical Presentation:
From the pie chart we can see, CCS held the 15% of total loan classified loan and media sector
held the highest classified loan, which is 26%. Loan on spinning sector held 12% of classified
loan, credit card and trading loan each have 3% classified loan. Classified loan on other sector is
not remarkable.
Year wise Retail Portfolio (1995-2008)
(Amount in Crore)
Year
Year wise disbursement Year ending outstanding Overdue
Amount Amount
No. of
A/C
% of
growth
Amount Amount
No. of
A/C
% of
growth
Amount Amount
No.
of
A/C
% of
growth
1995 53387 5.34 1691

49269 4.93 0%

1996 112213 11.22 2747 110.19 140267 14.03 0%

1997 97915 9.79 2029 -12.74 146580 14.66 5%

1998 70567 7.06 2312 -27.93 125709 12.57 -14%

1999 162750 16.28 2170 130.63 149924 14.99 19%

2000 198659 19.87 2866 22.06 228825 22.88 5733 53% 19009 1.90 1766

2001 326318 32.63 4077 64.26 372772 37.28 7852 63% 28760 2.88 2261 51%
2002 340441 34.04 4818 4.33 501636 50.16 9306 35% 49810 4.98 3479 73%
2003 440554 44.06 4462 29.41 570311 57.03 9302 14% 76358 7.64 3888 53%
2004 470500 47.05 4288 6.80 741892 74.19 10050 30% 102469 10.25 4172 34%
2005 1087369 108.74 5638 131.11 1247911 124.79 11912 68% 96209 9.62 4061 -6%
2006 1276539 127.65 5696 17.40 1641652 164.17 12697 32% 116772 11.68 4371 21%
2007 1879700 187.97 6986 47.25 2845038 284.50 14850 73% 148466 14.85 4855 27%
2008 3340800 334.08 10140 77.73 5016898 501.69 18950 76% 240830 24.08 7449 62%
From the table we can see that in 1995 loan disbursement was 5.34 Crore taka, by 2008 which
has increased to 334.08 Crore taka. In 1995 Prime Banks loan outstanding was 4.93 Crore taka
which has increased to 501.69 Crore taka in 2008. In 2001 Prime bank had overdue of 1.90 Crore
taka, by 2008 overdue amount has increased to 24.08 Crore taka.
Year wise Retail Credit Overdue Position (2001-2008)
From the graph we can see that loan overdue amount has decreased gradually from 2002 to 2005,
but after 2006 loan overdue has been increasing. In 2008 loan overdue increased by 62%, which
is a bad indication of the banks performance.
Year wise Retail Credit Disbursement Position (1996-2008)
From the graph we can see, Prime Bank has achieved over hundred percent growths in retail
credit disbursement in 1996, 1999 and 2005. Prime Bank had negative growth in 1997 and 1998.
Year wise Retail Credit Outstanding Position (1997-2008)
From the graph we can see, Prime Bank has positive growth in retail credit outstanding in almost
all the year from 1997-2008. In 2008 Prime Banks retail credit outstanding has increased in
highest amount which was 76%. We can also find a decrease in retail credit outstanding by 14%
in 1998. In may be due to the great flood of 1998.
Retail Product wise Position:
(Amount in Crore)
Product wise position as on 31.12.2008
Oustanding
Average
disb
Overdue Classification
Car 205.47 11.55 6.26 3.05
S.Neer 114.89 5.2 0.63 0.46
HHD 125.35 7.65 14.37 11.18
A.P 43.23 3.2 2.26 1.06
Other 12.75 0.13 0.56
Total 501.69 27.73 24.08 15.75
From the table we can see that car loan has the highest loan outstanding, which is 205.47 Crore
taka. House hold durables have second largest outstanding, Sapna Neer or home loan has 114.89
Crore taka outstanding.
We can also find from the table that House hold durables loan have higher level of overdue and
classification than other consumer credit product.
From the pie chart we can see that car loan is 40% of total loan outstanding of CCS products.
House holds durables and Sapna neer is 25% and 23% of total loan outstanding, where any
purpose loan is 9%. There are eleven types of consumer loan but car loan; House hold durables,
Sapna neer and any purpose loan encompass 97% of total consumer credit, where other seven
types encompass 3% of consumer credit loan.
From the pie chart we can see, house hold durables have highest loan overdue, which is 60%.
Car loan has 26% overdue. Other Loans products encompass rest of the overdue.
From the pie chart we can see that house hold durables have 71% of total CCS classification, Car
loan have 19% of CCS loan classification. Sapna neer and any purpose loan comprise rest of the
CCS classification.
Product wise 04 years Outstanding Comparison
Product
Outstanding
2005 2006 Growth 2007 Growth 2008 Growth
Car 42.66 64.05 50% 115.37 80% 205.47 78%
S.Neer 0.00 2.07 49.30 2282% 114.89 133%
HHD 62.61 77.01 23% 89.71 16% 125.35 40%
A.P 7.34 8.33 13% 17.87 115% 43.23 142%
Other 12.19 12.7 4% 12.25 -4% 12.75 4%
From the table we can see that sapna neer loan has the highest growth, any purpose loan has the
second highest growth and car loan has the third highest growth in 2007 & 2008.
Graphical Presentation:
From the graph we can see that in 2005 car loan has an outstanding of 42.66 Crore taka, which
increase to 205.48 Crore taka by 2008. In 2006 growth rate of car loan outstanding was 50%,
which became 80% in 2007 and 78% in 2008.
From the graph we can see that in 2005 HHD has an outstanding of 62.61 Crore taka, which
increase to 125.35 Crore taka by 2008. In 2006 growth rate of car loan outstanding was 23%,
From the graph we can see that in 2005 any purpose loan has an outstanding of 7.34 Crore taka,
which increase to 43.23 Crore taka by 2008. In 2006 growth rate of car loan outstanding was
13%, which became 115% in 2007 and 142% in 2008.
Product wise 04 years Overdue Comparison (Retail Credit)
Product
Overdue
2005 2006 Growth 2007 Growth 2008 Growth
Car 1.39 1.71 23% 2.96 73% 6.26 111%
S.Neer 0.00 0.01 0.07 600% 0.63 800%
HHD 7.85 8.91 14% 10.27 15% 14.37 40%
A.P 0.35 0.73 109% 1.18 62% 2.26 92%
Other 0.03 0.32 967% 0.38 19% 0.56 47%
From the table we can see Sapna neer has the highest loan overdue growth rate, car loan has the
second highest growth and any purpose loan has the third highest growth in 2007 & 2008.
From the graph we can see that in 2005 car loan has an overdue of 1.39 Crore taka, which
increase to 6.26 Crore taka by 2008. In 2006 growth rate of car loan overdue was 23%, which
became 73% in 2007 and 111% in 2008.
From the graph we can see that in 2005 HHD has an overdue of 7.85 Crore taka, which increase
to 14.37 Crore taka by 2008. In 2006 growth rate of car loan overdue was 14%, which became
15% in 2007 and 40% in 2008.
From the graph we can see that in 2005 any purpose loan has an overdue of 0.35 Crore taka,
which increase to 2.26 Crore taka by 2008. In 2006 growth rate of car loan overdue was 109%,
Types of Advances IFIC Bank:
The different types of advance are as follow:
CONTINUOUS LOAN:
Types of continuous Loan:
(i) Cash Credit Hypothecate (CC HYPO).
(ii) Cash Credit Pledge (CC PLEDGE).
(iii) Secured Overdraft (SOD).
Cash Credit Hypothecate (CC HYPO) :
Cash credit is the favorite mode of borrowing by traders, industries, agriculturist etc. for
meeting their working capital requirement. This type of facilities is always against (1) pledge of
goods produced and merchandise, (2) sometimes it is allowed against hypothecation. It is
operated like an overdraft account. The principle advantages of a cash credit account to borrower
are that, unlike the party is borrowing on a fixed loan basis, he may operated the account within
the stipulated limit and when required he can save interest by reducing on any day , however,
should not exceed the agreed limit granted. Technically a cash credit advance is repayable on
demand, without any specific date of repayment.
But
1. Cash credit is given through the cash credit account.
2. Instrument hypothecation Deed.
3. 50% margin requires opening a CC account.
4. It is granted only the first class parties.
Cash Credit Pledge (CC PLEDGE):
a) The nature, operation work & characteristics of CC PLEDGE in as same CC HYPO.
b) It is charged against properties where the ownership may remain to the borrower but the
possession is passed to the bank.
c) Instrument pledge Deed.
Table: 1 Cash Credit (Hypo & Pledge)
Year of Disbursement Amount
2004 805593854.25
2005 853858711.82
2006 900014025.11
2007 937178910.00
2008 99178910.00
In this graph shows CC (Hypo & Pledge) at Naya Paltan Branch constantly decreasing.
Secured Overdraft (SOD) :
Secured Overdraft (SOD) are those drawing which are allowed by the banks in access of the
balance in the current account up to a specified amount for definite period as arranged for?
(i) Generally it given to the businessmen to increase their business activities.
(ii) Usually provide against FDR, PSS, i.e. financial obligation or any primary securities.
(iii) Balance of OD account is fluctuates.
TERM LOAN:
Types of term loan:
(i) Industries
(ii) Staff loan: (a) Staff house building loan. (b) Staff loan against provident fund.
(iii) Others Loan.
(iv) Loan against PSS.
(v) House building loan
(vi) Consumer Credit Scheme.
Industries Loan:
It is given for 3 (three) years at equal installment & 15.50% interest is charged to the loan
amount.
Staff Loan:
(a) Staff House Building Loan SHBL
(i) 120 times of the basic salary is provided as SHBL
(ii) Bank Rate + 1%, interest is charged to the employee
(iii) Repayment is adjusted from their monthly salary
(iv) Repayment is made at equal monthly installment
(b) Staff Loan against Provident Fund SPF:
(i) 10% of basic is contributed by employee in every month
(ii) 10% of basic is also contributed to the PF by the Bank
(iii) Repayment is adjusted from their monthly salary
(iv) Maximum Sanction from PF
1-5 years of confirmed service 50% Own Contribution
5-7 years of confirmed service 60% Total Contribution
7-10 years of confirmed service 70% Total Contribution
Above 10 years of confirmed service 80% Total Contribution
Others Loan:
Transport loan (It is given for 3 years at equal monthly installment), Cold storage, Service
Industries, Other Non-manufacturing Industries, & Execution of work order interest rate are
15.50%.
Agricultural Loan : Actually Agricultural loan is not given from this branch of IFIC Bank but
the all other items excluding the mentioned above will go under this head of term loans.
Generally its interest rate is 12.00%.
Loan against PSS
This is 100% secured for the bank.
Table:-2: Total Advance of IFIC Bank Ltd. Naya Paltan Branch.
Year of Disbursement Total Advance
2004 132,747,168.67
2005 174,449,348.33
2006 217,681,761.27
2007 233,211,117.44
2008 2392111170.00
Source: Yearly Statement of I FI C Bank Ltd. Naya Paltan Branch.
Table: 3: Term Loan (Consumer Credit) of IFIC Bank Ltd. Naya Paltan Branch.
Year of Disbursement Amount
2004 26809810
2005 29267940
2006 32240210
2007 36160770
Source: Yearly Statement of IFIC Bank Ltd. Naya Paltan Branch.
From the above analysis we say that Due to the continuous observation from top management
and selection of worthy borrower yearly loan distribution scenario is satisfactory.
Comparative Analysis of Advances between IFIC Bank & The Prime Bank Limited.
Table: 4: Growth in Advances:
Year Advance in million taka Of
PBL
Advance in million taka Of IFIC
Bank
2004 17027 20450.90
2005 23326 23625.45
2006 27173 25345.60
2007 32498 28564.75
Source: Yearly Statement of IFIC Bank Ltd. & CBL
From the above figures we can find that in the end of year- 2004 CBL is not properly responding
in advance sector than IFIC Bank. But after that both banks are growing faster in terms of time.
But CBL is growing faster than IFIC bank. But IFIC Bank re-organized in 2008 and takes new
project like Transportation Loan, House Building Loan etc. By this it is also on the Track in this
year.
Recovery of loan:
This is vital for IFIC Bank Limited because the financial market strength of our country is not so
strong. As far to recover the lending money and great threat, because in our country; business
chain is so difficult like other countries and depend to other. So, if the monetary flow faces any
obstacle it hampers the functioning of full chains. As a result recovery face a great threat for
commercial banks as well as IFIC Bank Limited is not out of this threat. However, this stagnant
may cover up duly taking proper planning and implementation of the same in regards of loan
sanctioning and proper monitoring for recovery of the same. But IFIC bank Limited yet doing
well for recovery of its loan amount. It is good news for all the stakeholders that the percentage
of classified loan of the end less than 1% where this ratio is very high for similar types of banks
prevailing in our country especially for older banks of the country. Here remind that now IFIC
Bank offered by the general loan interest rate is 14% and CCS loan is 16%
Comparative Scenario
In previous chapter we have had idea about the credit appraisal and management process of the
Prime Bank Limited and The International Finance and Investment Banking Corporation Limited
(IFIC). Now lets perceive the comparison in different aspects of those policies through the
following table:
Aspects Prime Bank Ltd I FI C

Objectives
To provide reachable credit facilities
Conservative lending policy & Long term ethical client service
Eligibility Judgment
As per Banks own policy and Bangladesh Bank guidelines
As per Banks own policy.
Security/Collateral
Moderate
High
Tenure
Long, Short & Mid-term
Short & Mid-term
Loan Pricing
Moderate; determined tat market price
High & Complex
Loan Processing time
Moderate
Long
Amount of Loan
Depends on types of loan
Depends on types of loan
Sect oral Investment
Encouraged
Partially encouraged
Supervision, monitoring & implementation
Strict & Regular Follow-up
Ensured by Legal Framework & Regular Follow-up
Products
Wide Range of Products

Limited range of Products
Refinancing
Provided for good clients

Provided for good clients

Installment
Determined by the turnover & loan ratio
Fixed up as per the bank policy
Interest Rate
Always follow the market rate
Hig
Marketing Strategy
Long term, contemporary & Customer oriented
Long term, Modern & Customer oriented
Flexibility
Flexible to adjust with the changes
Flexible
Complexity
Loan disbursement procedure is not complex
Complex provisions& stipulation
Recovery
Recovery Rate is high
Recovery Rate is lofty
Diversification of Portfolio
Well diversified
Non diversified
Uniqueness
Unique
contemporary
Transparency
Well maintained
Not publicly disclose
Social Contribution
Has huge contribution to the economic & socio-economic sectors
Improves standard of living
Network banking
Exists
SWOT ANALYSIS:
SWOT analysis enables an organization to have a comprehensive insight about its current
position in the industry compared to the competitors. It provides the organization a scope to
strategically improve its position in the market. Here, the internal strengths and weaknesses of
Prime Bank Limited as well as the external opportunities and threats are discussed:
Strengths
Strong Management: Prime Bank Ltd. has a very efficient and strong management team.
Administration is done in a timely and systematic manner. There is a close relationship between
the employees and the management though the chain of command is maintained strictly. Overall,
there is a good balance between the administration and the employees. Prime Bank is recipient of
ICAB Award for best Published Report. It clearly demonstrates the good corporate governance.
Managing director of PBL visits all the branches frequently and randomly, so that he can observe
and can be informed about each segment of operations of all the branches. He is also a very
capable person for his position.
In this bank, branch managers have the authority to select different executives from whole PBL
for their branch. This is a very effective system of management, because then they can work
smoothly and cooperatively.
Customer Care: PBL has a very good relationship with its customers. The core philosophy of
this bank is customer car. The bank believes in maintaining personal relationship with its clients.
One of the major goals of the bank is to build long term relationship with the customer and to
create value for them. To maintain this relationship, PBL sometimes waive high charges for
those valued clients who are linked with the bank for a long period of time. Moreover, in order to
provide full support and high quality service, a complaint cell has been formed.
Risk Management: Prime Bank places utmost importance on managing credit risk. The bank
closely examines credit risk from both micro perspective (credit risk of individual customer) and
a macro perspective (loan portfolio risk). Lending functions have been segregated into three
broad functions:
(a) Credit Approval
(b) Relationship Management/Marketing, and
(c) Credit Administration
PBL gave special attention to the risk management and the process includes:
(1) Management of Credit Risk
(2) Management of Foreign Exchange Risk
(3) Prevention of Money Laundering
(4) Asset-Liability Management
(5) Internal Control and Compliance
The bank implemented the guidelines given by Bangladesh Bank in this regard for safeguarding
stakeholders interest. That is why PBL can maintain efficient use of assets.
Innovative Products:
Prime bank has been offering various kinds of deposit schemes by which people have got
opportunity to save their small money and bank is also able to earn more for themselves from
their clients. Most of the private banks are offering three to four number of deposit schemes.
Comparatively Prime Bank offers maximum number of deposit schemes by which the bank is
successful to capture and retain large number of customers. Prime also provides different types
of credit schemes for different types of customer. As a result, Prime Bank can satisfy customer
needs according to their demand.
Weaknesses
Compensation: The pay scale of employees in PBL is not competitive compared to the effort
they put it on their job. Employees of the PBL have to stay at least one hour more every day after
office hour. There is also a rule in PBL that, AD branches remains open in one of the weekly
holiday (Saturday from 9.00 am to 1.00 pm) and some of the employees have to work
overtime. But, here too, the remuneration is not satisfactory.
This creates dissatisfaction among the employees which carries the risk of rise in employee
turnover rate. Those who cannot switch bank are often discouraged to give their best effort in the
job.
Succession plan and Promotion: There is no succession plan in the employee hierarchy. That
means, even if one employee-performance is outstanding there is no assurance that he/she can
reach in the top position of this bank. When an employee gets a promotion to the next level,
he/she gets more compensation. PBL is regular in giving promotion, but the employees get late
effect of this promotion. Often there is a long gap, for example a six month gap in getting the
effect.
Training: PBL has its own training institute PBTI (Prime Bank Training Institute) to strengthen
the capabilities of human resources. However, it is not always possible to give thorough training.
Especially, there is a lack of specific training for specific jobs. As a result, the employee has to
learn things from the job by doing it practically. Moreover there is no security of getting
promotion even after a successful training accomplishment.
Technology:
One of the major weaknesses of Prime Bank Ltd. is the technology used by the bank. With the
change of time, technological advancement is essential to survive in the competition. Hence,
PBL is lagging far behind in this area. PBL was the pioneer in online banking but the online
facility which the bank is providing currently is not up to the standard.
Opportunities
ATM Facility: In 1999, PBL obtained the membership of Master Card and a separate division
has been assigned to look after the credit card operation. There are four types of credit card;
Local Silver Credit Card, International Silver Credit Card, Local Gold Credit Card, International
Gold Credit Card. Prime Bank Ltd. has launched its ATM (automated teller machine) service
aiming to provide 24-hour services including ready cash, balance searching and instant mini-
statement facilities to their clients. PBL has limited number ATM facilities compare to their
competitor. PBL has to share ATM Booth with Dutch-Bangla Bank.PBL has a good opportunity
to provide their own ATM facility to the customers in near future and survive in the competition.
Branch Expansion: Prime Bank Ltd. is growing very quickly all over the country. Besides
expanding in the urban areas, PBL has the prospect to open more branches in suburban areas
which will eventually enhance the governments effort at reviving the rural economy. It will also
serve the people of those areas better. For example, Madhabdi Branch (beside Baburhat) is
running its business successfully, but there is a need of a branch in the inner side of Norshingdi,
where the actual small businesses are situated.
Training Facility: Prime Bank Training Institute (PBTI) is supporting the bank by offering in
house training courses, workshop and seminars. As the bank has its own training institute to
enhance the capability of their human resources, PBL can use this opportunity to train their
employees in specific areas and create specialize and expert people for the bank.
Threats
Level of Competition: Competition is always a major threat for any organization. In recent
years, the number of private bank is rapidly increasing. These banks always pose a threat for
others by coming up with new product line, innovative technology, quality services, etc. Thus the
level of competition rises and creates threat for Prime Bank Ltd. In recent years well-built banks
are operating in this country, which poses a great threat to any private bank in banking industry
Bangladesh.
Compensation Package: Compared to other private banks of Bangladesh, the compensation
package of Prime Bank Ltd. is not attractive. Though the employees of PBL gets fair financial
and other benefits in general, the base pay is not sufficient. This poses a threat of switching
banks as other private banks are giving lucrative offer.
Political Instability: The political unrest as well as the law and order situation of Bangladesh is
always a threat for banking industry. Especially, the events of recent years, the corruption level
of our country; the terrorist attack, money laundering, and the poor infrastructure are affecting
the national economy. The current economic situation is very likely to get worse further. In this
case, the whole banking industry is facing a big threat.
Global Economic Crisis: Global economic crisis pose a threat to banking sector. Because of
global economic crisis, number of export-import decrease as well as taking loan from banks. As
a result banks profit goes down. Though global economic crisis hasnt severely affected our
economy but still it is the biggest threat to any bank.
Findings
The contribution of banking industry towards the whole economic development of Bangladesh is
beyond doubt. It up holds the economic base by way of increasing total foreign currency reserve.
As we are import-based country the foreign currency reserve play a vital role in the economic
activities. Day by day the popularity of banking business is increasing as well as the competition
is also increasing. Currently 52 commercial banks are operating in Bangladesh. Most of the
products of commercial banks are almost same, but the ways of providing services are different.
So consumers choose their banks based on their needs and satisfaction. Because of the existing
economic vulnerability, both the Banks and the consumers are afraid of taking long-term loan.
This is why the popularity of Consumer Credit is increasing, as it is easily recoverable,
sanctioned for a very short period of time and sanctioned a less amount of credit under the
Consumer Credit Scheme. During the period of working on the Consumer Credit Scheme of
Prime Bank, I have noticed the following facts:
Prime Bank employs young people as sales representative for pursuing the people directly.
There are two types of direct sales agents in Prime Bank, one type of agents visit offices of
different business organization to get deposit for bank and the other type of agents find customer
for consumer credit loan. They bring a large amount of deposits for the bank as well as promote
the Consumer Credit Scheme .They also offers home service to the clients.
The number of customer of Prime Bank is increasing is because of the better service that is
provided towards the customers, despite the fact that Prime Bank does not promote their
Consumer Credit Scheme as other banks.
Prime Bank has their own direct sales agents whose job is to attract customer for their
consumer credit scheme. Direct sales agents have a target sixteen Lac taka, which they have to
achieve every month. If they fail to achieve their target for three months they will be put on
provision and may lose their jobs if they continue to perform below standard. For this reason all
agents are concerned about achieving their target. Direct sales agents tend to fulfill their target
with any means possible, so they sometimes bring customer who is not qualified to take loan. As
a result, the amount of overdue of Prime Bank is increasing.
Though the portion of Consumer Credit Scheme within the total credit portfolio of Prime Bank
is very small, it generates a huge amount of interest income for the bank. So the Prime Bank
increases its investment in the field of Consumer Credit Scheme over time. Because the short-
term loan provided under the Consumer Credit Scheme is less risky and easily recoverable, the
foreign banks offer a huge amount of credit under this Scheme.
The borrowers sometimes provide faulty information regarding income, expenditure, and
guarantor and intense of taking the loan.
The market for the consumer credit is very competitive, so it needs to be promoted seriously.
The promotional activities of Prime Bank are not sufficient.
There are eleven types of consumer credit scheme in Prime Bank but only four types of
consumer credit are provided to customer. Car loan, Sapna neer (Home loan), HHD (House Hold
Durables) and any purpose loan encompass almost ninety seven percent of total consumer credit
disbursement.
During my internship I found out that structure of some consumer credit scheme is unfriendly in
nature like education loan. Education loan have to be taken in the name of parents and have to
start paying installment like other consumer loans, but most customer of this loan are not able to
pay installment immediately. In many cases parents lives outside Dhaka and Prime Bank does
not have branches covering all the districts as a result most of the customer dont get education
loan. In Kawran Bazar Branch, everyday at least one person comes for education loan and return
without taking the loan because of its unfriendly structure.
Some consumer credit schemes have negative impact on customer like marriage loan. There was
some cases where retail credit officer go to inspection in brides home, the brides family took it
negatively and call of the wedding. As a result customer doesnt take the loan and it had negative
effect on banks reputation.
Direct sales agents dont promote all Loans. They concentrate on bigger and popular consumer
loans like- car loan, any purpose loan etc. As a result most of the costumer only takes four types
of consumer loan.
Prime Bank got eleven types of consumer credit schemes but most of the schemes are unknown
to customers because of lack of promotional activity.
Prime Bank got only seventy branches in major cities and districts of Bangladesh.
Prime Bank got limited Islamic Banking services in few branches.
Recommendations
Prime Banks existing reputation in the market bringing up most of its customer. Though
Prime Bank use electronic media for promotional activity, but its not enough. Prime
Bank also uses their sales agent for promoting their services. But now competition in
banking sector has increased, Prime Bank should use more creative advertisement on
electronic media for promotional activities. Prime Bank should also use CSR activities to
create positive impression on customers mind as well as for promotional activity. If
Prime Bank uses more promotional activity, it will attract more customers and Prime
Bank will able to make more profit.
Prime Bank only have seventy branches, most of the branches are in Dhaka and
Chittagong city. As a result, Prime Bank losing business opportunities. Prime Bank
should increase it numbers of branches to cover a large number of clients in rural and
urban areas. Prime Bank should set up branches where customer demand exists and bank
will able to make profit.
As majority of people of Bangladesh is Muslim, there is always a huge demand for
Islamic Banking services. The Prime Bank should increase their Islamic banking
branches. Many Non-Islamic banks taking this opportunity by opening Islamic Banking
branch. Prime Bank got few Islamic banking branches but there is more demand. So,
Prime Bank should open more Islamic Banking branches to attract more customers.
Furthermore, Prime Bank should introduce consumer credit scheme in Islamic version to
attract fundamental Muslim customer.
Prime Banks loan classification and loan overdue is increasing with retail loans
disbursement amount. In 2008 Retail loan overdue increased by 62%, which is an
alarming rate. Prime Bank should investigate the reason behind such increase in retail
loan overdue amount. Prime Bank also should increase its monitoring and supervision
activities to reduce its default loan as number of loan overdue and default is increasing.
Prime Bank should also inspect carefully before giving any loan because creditors can
give wrong information, because the borrowers may provide faulty information regarding
income, expenditure, and guarantor and intense of taking the loan, this information
should be justified properly by the credit officer.
Some loan structure of Prime Bank is not customer friendly like education loan and
marriage loan. There are some terms and procedures of these consumer loans which
prevent customers to take loan. Prime Bank should restructure these loans so that it
becomes customer friendly and they start to take these loans.
There are eleven types of consumer loan but customers tend to take only four types of
loan from Prime Bank. Prime Bank should re-launch the less popular consumer credit
categories to attract more customers like hospitalization loan, doctors loan etc.
CONCLUSION:
Prime Bank limited is a modern commercial bank. It is committed to provide high quality
financial services / products to contribute to the growth of G.D.P. of the country through
stimulating trade & commerce, accelerating the pace of industrialization, boosting up export,
creating employment opportunity for the educated youth, raising standard of living of limited
income group and overall sustainable socio-economic development of the country. The Bank is
operating efficiently with its existing products and services. It has remained profitable from the
inception of its operation in the commercial banking sector. The emergence of fierce competition
and adverse economic condition has forced the bank to be innovative in offering its products and
customer services. The services which the Bank provides to their clients are very prompt and
quality one compare to other private or foreign banks. The consumer credit business of Prime
Bank Limited provides tailored services to clients. The consumer credit one of profit making
segment of the business. Asset liability management is the main sector in banking for achieving a
good position in banking sector. As Loan & Advance is the main asset of a bank, quality of asset
should be managed well for better performance of a bank. It can be said that the Credit Risk is
very uncertain and increasing default of any type of credit may create a great problem for a bank
even sometimes it may arise a question regarding the existence of a bank. So, it is very important
for retail credit department to select a customer. In this regard, Bangladesh Bank is publishing
different types of circular very frequently for increasing the carefulness and alertness of the
bankers. Prime Bank Limited is very much complied when they disburse any type of Loan.
Besides this, the audit at PBL is conducted by the internal auditor very frequently. As a result,
the employees of PBL are doing their duties according to the circulars provided by their Head
Office as well as Bangladesh Bank. The percentage of classified loan of PBL is near 1.73%
which reflects the competency of the employee of PBL. It is observed that the big portion of
credit portfolio is covered by Overdrafts and Loan General enjoyed by a limited number of
customers, which may be a threat for the branch. So if the management tries to diversify their
loan product in Small & Medium Enterprise sector and Retail credit, the credit portfolio will be
more strengthen.
References
Bangladesh Bank, BRPD Circular 09; August 20,2005, BRPD Circular 02;
February 02, 2005, BRPD Circular 09; May 14, 2001
Prime Bank Ltd., Annual Report; 2004, 2005, 2006 & 2007
Prime Bank Ltd., Head Office Circulars; 2006, 2007
Prime Bank Ltd., Brochures of Loans and Advances; 2007
www.prime-bank.com.bd

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