Internship Report on NCC Bank Ltd.

ABSTRACT

In order to provide a student with job exposure and an opportunity of the transition of theoretical
knowledge into real life experience, an internship is a must. A better balance between theory &
practice can be gained through this program. Banking system of Bangladesh has gone through
three phase of development such as (Nationalization, Privatization and Financial Sector
Reform). National Credit and Commerce Bank is the largest Private Commercial Bank from
1993 with new hope and promise to serve the countrymen. This report mainly divided into three
parts. First Part deals with my practical experience as an internee in NCC Bank limited, Uttara
Branch and my own observations on Management and Organizational Pattern of the NCCBL.
And final part deals with approval, disbursement and recovery system of credit in NCC Bank
Limited. The report is a combination of three months internship program with NCC Bank
acknowledged different banking functions and day-to-day banking operations on my way to
complete internship. In this paper I have explained my best in respect of my real life experience
gathered from different departments.

CHAPTER-1 INTRODUCTION

Origin of the report:
Bachelor of Business Administration (BBA) is a professional course. The course is designed
with an excellent combination of practical and theoretical aspects. After completing BBA certain
times is preserved for internship. The dissertation program is an integral part of BBA program
that all the students have to undergo of ASA University Bangladesh (ASAUB). The students
are sent to various organizations where they are assigned to. At the end of the program, the
internship is required to place the accomplishment and findings of the project through the writing
of the dissertation report covering the relevant topics. During this program, the supervisor guides
each student-one from the university and the other from the organization. I took the opportunity
to do my internship in National Credit and Commerce Bank Ltd(NCCBL).This report is the
result of three months continuous effort on Approval, Disbursement & recovery system of
credit: In NCC Bank. This topic of the report has been consulted and directed by the
internship supervisor Mohd. Takdir Hossain, Lecturer, ASA University Bangladesh (ASAUB).
And authorized me to prepare this report as part of the fulfillment of internship requirement.


Background of the Report:
Achievement of high economic growth is the basic principles of present economy policy. In
achieving the objectives the banking sector places an important role. The banking sector channel
resources through deposit mobilization and providing credit for different business venture. The
successful running of a bank business depends upon how effective the credit management
recovered the funds and risk analysis of the bank. NCCBL as a new commercial bank in
Bangladesh responsibility bestows upon it to ensure efficient and effective operation and sound
manner. I have worked in various Department of NCC Bank Ltd, Uttara Branch. In this report, I
will try to make an overall analysis on all activities of NCC Bank Ltd specially focuses on credit
management & international trade.

Scope of the study
This internship program gives me a great scope or opportunity for gather experience and
knowledge in several areas of banking by which I can evaluate or expose myself. During:-e first
few week of my internship period, I was able to communicate most of the employees of the
bank. During the first month I was able to accustom and adapted myself with the working
environment of NCC Bank Limited. While preparing this report, I had a great opportunity to
have an in depth knowledge of all the banking activities practices by the NCC Bank Ltd. It
also helps me to acquire perspective of a leading private banking in Bangladesh. In term of Bank
we can easily understand that the financial institution deals with money. This study focuses
mainly on Credit Approval, Disbursement and Recovery policy. In so doing the loan system,
loan evaluation criteria along with the loan administration was covered in the study. The loan
products applicants have been segmented and analyzed based on the secondary data provided
which could be conducted on an even broader spectrum. Inclusion of various other topics would
have also been helpful.

Rationale of the Study
The word bank refers to the financial institution that deals with money transaction.
Commercial banks are the primary contributors of the economy of this country. On one hand
they are borrowing money from the locals and on the other hand lending the same to the locals as
loans and advances. So he people and the government are very much dependent on banks.
Moreover, banks are profit earning concerns, as they collect deposits at the lowest possible cost
and provide loans and advances at higher rate. The difference between two is the profit for the
bank. This report basically deals with the loan and advance management of National Credit and
Commerce Bank Limited (NCCBL) covering the areas like General Banking, Loan and
Advance, Foreign Exchange, Remittance, Financial Performance, Online Banking, etc.

NCC Bank Branches
CHAPTER-2 LITERATURE REVIEW

Literature Review

In Bangladesh, the contribution of banking sector towards the economic growth and
development of both the public and private sectors is enormous. It has been possible for easy
access to loans and advances.

Muhammed Khaled Latif describes, since the inception of the banking sector, the prime
functions banks have been accomplishing are to mobilize resources from the surplus unit and
deploy in the deficit unit. In that accomplishment banks act as an intermediary being a privileged
creditor. From experiences it knows that people are not going to withdraw their entire deposit at
a time and banks accumulate huge surplus funds in their exchequer ready for lending. Many a
rich and elite people have resorted to interest waiver. The culture continues till today. Thanks to
the central bank which has devised the classification procedures up to international standard. For
the early warning system, a bad performing loan is being termed as SMA after three months of
its default and being classified as SS, DF and BL with the expiry of six, nine and 12 months
respectively. Loan loss provision has to be provided by the banks on the base for provision that is
the amount of provision will be equal to the amount of the value of eligible security plus the
interest suspense minus the amount of outstanding in the account. In spite of the precautionary
measures, the loans are being defaulted. Then the question of recovery arises. There are many
recovery processes such as, regular transaction in the account, amiable settlement with the
borrower; rescheduling, attachment of security; auctioning of security and also through filing
suits. But the best among all of the above modes is amiable settlement, because it involves no
cost. So, the creation of credit by the banking sector has created the opportunities for the overall
development of the country. Industry, trade and commerce, import and export, communications,
information technology and agriculture has experienced a tremendous growth in the recent years
due to easy circulation of credit. In spite of the stringent measures, loan defalcation is there,
especially in the public sector banks. Credit should not be easily available for consumer goods
and household durables which creates credit crunch and pushes inflation; Concentration of credit
in a single sector or industry must not take place; Credit should be collateralized as far as
practicable; Agriculture and agro-based industries should be prioritized; Follow up and
monitoring must be emphasized; Diversion of funds to other business or unproductive sectors
must be stopped; Proper vetting of the documents should be done by experienced and unbiased
panel of lawyers; The Sanctioning authority must be of high moral and ethical standards; Banks
interest must be protected and national interest must be protected, too. Nevertheless,
management of credit is a process of hectic exercise of processes, procedures, resources, due
diligence, ethics, morality, judgment, values, authority, articulation and analysis. The loan
creation, documentation, disbursement and recovery of the loans involve a high profile review
process. Once all the above elements are combined together to manage loans and advances, no
loan will be nonperforming. However, in reality how far it is feasible is a matter of contention.

Dr Atiur Rahman is Governor, Bangladesh Bank
Since liberation, Bangladesh has made remarkable development turnaround proving the earlier
prediction of basket case utterly wrong. Indeed, Bangladesh has now become a success story of
development recognized by the Wall Street Journal as well as by many rating agencies. Over the
last three decades, per capita income has increased nearly four-fold and with its current trend of
growth, middle income country status for Bangladesh is expected to be achieved by next three to
four years. Bangladesh Bank will continue designing of monetary and credit policies targeted at
supporting attainment of the countrys desirable growth targets through ensuring adequate credit
flows to the productive sectors. It will also continue to encourage various financial innovative
experimentations without forgetting its core role of maintaining financial stability and containing
inflation.



Mohammad Nurul Amin (Managing Director& CEO), NCC Bank Ltd.
You will be happy to know that to further strengthen our position and streamlining activities of
different units of the Head Office and Branches, we have taken a new approach of centralizing
opening a letter of credit and credit operation. Centralization of Credit Administration brought
discipline in documentation of loan before disbursement. It will also help secure quality of the
assets and lower quantum of NPL in the coming days.

Background of the NCC BANK LTD.
Due to inefficiency and continuous loss of public sector, The Government of Bangladesh
changed its policy in favor of privatizing and a number of banks were launched in private sector.
National Credit and Commerce Bank Limited is one of the second-generation domestic private
banks in Bangladesh after the war of independence.

NCC BANK LTD was incorporated in Bangladesh as Banking Company under the Companies
Act.1914. National Credit and Commerce Bank Ltd Is one of the begets national in Bangladesh
which bears a unique history of its own. The organization started its journey in the financial
sector of the country as an investment company back in 1985. The aim of the company was to
mobilize resources from within and invest them in such way so as to develop countrys Industrial
and Trade Sector and playing a catalyst role in the formation of capital market as well. Its
membership with the browse helped the company to a great extent in this regard. The company
operated up to 1992 with 16 branches and thereafter with the permission of the Central Bank
converted in to a full fledged private commercial Bank in 1993 with paid up capital of Tk. 39.00
corer to serve the nation from a broader platform. Since its inception NCC Bank Ltd. has
acquired commendable reputation by providing sincere personalized service to its customers in a
technology based environment. National credit and commerce Bank Limited was incorporated in
Bangladesh as a banking company. I worked in the account opening desk, clearing and loan
department of NCCBL. This gives me the opportunity to know more on different aspects of the
company.
So, I prepare my intern report on credit management and risk analysis of the NCCBL. NCC bank
ltd is one of the dynamic banks in Bangladesh so it has its own mission and vision toward the
country.

History of NCC BANK LTD.

National Credit and Commerce Bank Ltd. bears a unique history of its own. The organization
started its journey in the financial sector of the country as an investment company back in 1985.
The aim of the company was to mobilize resources from within and invest them in such way so
as to develop countrys Industrial and Trade Sector and playing a catalyst role in the formation of
capital market as well. Its membership with the browse helped the company to a great extent in
these regard. The company operated unto 1992 with 16 branches and thereafter with the
permission of the Central Bank converted into a full fledged private commercial Bank in 1993
with paid up capital of Tk. 39.00 core to serve the nation from a broader platform Since its
inception NCC Bank Ltd. has acquired commendable reputation by providing sincere
personalized service to its customers in a technology based environment. The Bank has set up a
new standard in financing in the Industrial, Trade and Foreign exchange business. Its various
deposit & credit products have also attracted the clients-both corporate and individuals who feel
comfort in doing business with the Bank.

Corporate Vision
To become the Bank of choice in serving the Nation as a progressive and Socially Responsible
financial institution by bringing credit & commerce together for profit and sustainable growth.

Corporate Mission
To mobilize financial resources from within and abroad to contribute to Agricultures, Industry &
Socio-economic development of the country and to pay a catalytic role in the formation of
capital market.
Slogan
Where Credit & Commerce Integrates
Values
Customer focus
Integrity
Team Work
Respect for individual
Quality
Responsible citizenship Management Information System.
Motto
The Bank will be a confluence of the following three interests:
Of the Bank: Profit Maximization and Sustained Growth.
Of the Customer: Maximum Benefit and Satisfaction.
Of the Society: Maximization of Welfare.
Profile
National Credit & Commerce Bank Ltd
Phone: +880-2-9561902-4, 9566283, 9563981-3
Fax: +880-2-9566290
Email: nccbl@bdmail.net
Head Office
7-8, Motijheel Commercial Area, Dhaka 1000, Bangladesh.
Known As: NCCBL
Established: 1993
SWIFT Code: NCCLBDDH
Stock Code: NCCBANK
Category: Commercial
Type: Private


Management Structure

Management of NCCBL is professional and experienced. Top management and policy
formulation of the bank is vested on the board of Directors. The boars of directors consist if 26
members headed by chairman. Most of the directors are owners of the large business group
having high net worth. The executives and officers of the bank execute the policies and programs
formulated by the board. The managing director is the chief executive of the bank and he is
assisted and supported by other qualified executives like Senior Executive vice-President,
Executive vice president (EVP), Vice President (VP), senior assistant Vice president and other
officers and staffs. There are nine divisions in this Bank and one training institute.

Departments of NCCBL

If the jobs are not organized considering their interrelationship and are not allocated in a
particular department it would be very difficult to control the system effectively NCC Bank
Limited has does this work very well. Different departments of NCCBL are as follows:
Human Resources Division
Personal banking Division
Treasury Division
Operations Division
Computer and Information Technology Division
Credit Division
Finance & Accounts Division
Financial Institution Division
Audit & Risk Management Division

Branch List:

National Credit and Commerce Bank Limited
Head office
7-8 Motijheel C/A, Dhaka-1000.
Tel: 9561902-4, 9566283, 7117314
Fax: 8802 9566290, Telex: 642821NCL BJ
E-mail: nccbl@bdmail.net, Website: www.nccbl_bd.com
Main Branch
Agrabad Branch
Khatungonj Branch
Khulna Branch
Babubazar Branch
Jubilee Road Branch
O.R. Nizam Road Branch
Chowhatta Branch
Dhanmondi Branch
Moghbazar Branch
Gulshan Branch
Malibagh Branch
Coxs Bazar Branch
Laldighirpar Branch
Jatrabari Branch
Mirpur Branch
Kawran Branch
Dilkusha Branch
Islam Pur Branch
Haliashahar Branch
Foreign Exchange Branch
Madunaghat Branch
Uttara Branch
Baralekha Branch
Syedpur Branch
Patgram Branch
Bariyarhat Branch
Nababjong Branch
Rajshahi Branch
Madhabdi Branch
Elephant Road Branch
Anderkilla Branch
Feni Branch
Kadamtali Branch
Laxmipur Branch
Mitford Branch
Bangshal Branch
Majhirghat Branch
Moulivibazar Branch
Jessore Branch
Rangpur Branch
Bogra Branch
Hajigonj Branch
Nowabpur Road Branch
Madaripur Branch
Chakaria Branch
Banani Branch
Chaumuni Branch
Rangpur Branch

Chitagong epz Branch

Functions of the NCC BANK LTD.

Establishing Banker Customer relationship,
Remitting customers money from one place to another,
Collecting bills for customers,
Taking deposit and honoring Cheque drawn over Local Office.

Products and services:

Since the commencement of banking operation; National Credit and Commerce bank
Ltd(NCCBL) has not yet only gained enormous popularity but also in successful in mobilizing
deposit and loan products. The bank has made significant progress within a very short time
period due to its dynamic management and introduction of various customer friendly loan and
deposit products. There have also had other departments that can be termed as support and these
are operations, credit administration, financial control and Human Resource. All the products
and services offered by the bank can be classified under three major heads:

Personals Banking
Deposit schemes:
Savings Account.
Current deposit Account.
Locker Service.
Fixed Deposit Receipt.
Bearer Certificate of Deposit.
Short Term Deposit.
Credit & loans:
Consumer credit Scheme
Education Credit Scheme
Multipurpose loan
Loan General
Education Credit Scheme
Multipurpose loan
Loan General

Foreign Currency Account:

Resident Foreign currency Account.
Non-Resident Foreign currency Account.

Corporate Banking
Small and Medium Business:

Cash Credit Hypothecation (CC Hypo)
Cash Credit Pledge(CC Pledge)
Secured Overdraft.
SOD against Work Orders.
Large Business
Short Term Industrial Loan
Mid Term Industrial Loan
Long Term Industrial Loan
Transport Loan
CommercialHouseBuilding Loan


Foreign Trade
National Credit and Commerce bank Ltd (NCCBL) provide solutions in the field of international
business and trade finance.
Letter of Credit(L/C)
Back To Back letter of Credit(BTB)
Loan Against Trust Receipt(LTR)
loan Against Imported Merchandise(LIM)
Packing Cash Credit(PCC)
Export Development Fund(EDF)
Payment Against Document(PAD)
Bank Guarantee
Lease Financing:
An entrepreneur, under this scheme, may avail of the lease facilities to procure industrial
machinery (without having to purchase it by down payment) with easy repayment schedule. The
clients also get special rebate in their income tax payment under the scheme.

Islamic Banking:
Some of the branch of NCC bank open profit loss sharing term/savings deposit amounts and also
allow loans on Mudaraba, Musharaka, Murabaha system. Attractive profit is given at the end of
the year after deducting the banks service fee through proper accounting.

Financial products:
Financial products of the National Credit and Commerce Bank Limited (NCCBL) are mainly in
three different categories:
These are:
Short term financing products
Mid term financing products.
Long term financing products.
Above categories of financing covers the following areas, which are draft with at general
Credit Division.
Agricultural sector.
Large and medium term loan.
Working capital financing in industrial units including small industries.
Commercial Credit scheme and any other new product as and when launched for.
Term loan in small industries
Term loan in small industries.
Term loan in commercial house building at urban area & transport loan.
Commercial loan.

Micro Credit Financing:
To fulfill its commitment to play a vital role to its socio-economic development of the country
NCC bank Ltd has introduce a small and medium scale credit scheme for its customers. The
objective of the scheme is:

To encourage and develop medium and small entrepreneurs.
To provide credit with minimum complexity.
To generate employment.
This scheme covers agricultural sector, small and cottage industry, service industry, household
durable and consumer credit, information technology sector and energy sector. The amount of
small and medium credit range from 5 Lac to 50 lacks.

Special services:
Consistent with the modern age and competing in a perfectly competitive market. The National
Credit and Commerce Bank Ltd (NCCBL) has introduced some innovative banking services that
are remarkable in a country like Bangladesh. T services offered by the bank are as follows:


ATM service:
The bank has joined the shared ATM network Bangladesh with a pool of 7 banks. The client of
any member bank will have access to any ATM situated at different location of Dhaka city. This
banks client will get 24 hours cash withdrawal and utility bills payment facility. 16 ATMs will
be installed gradually in Dhaka city and the network will be extended to other cities if the
country in the near future.

Credit Card:
To provide best possible customer services to its clients, the bank is going to launch Master
Credit card shortly.

Money Grams:
Money Gram is one of the innovative products of the bank. This has been functioning
satisfactory and rendering prompt and efficient services to the wage earners.

Swift:
The bank has become a member of SWIFT and is providing a fast and accurate communication
network for financial transactions to their valued clients through uninterrupted connectivity with
thousands of users institutions in 150 countries around the world.

Deposit Product
NCC Bank Limited is now offering different types product for mobilizing the savings of the
general people.
Current A/C
Savings Bank Deposit A/C
Short Term Deposit A/C
Term Deposit A/C
Premium Term Deposit A/C
Instant Earnings Term Deposit A/C
Special Savings Scheme
Special Fixed Deposit Scheme
NFCD
RFCD
Money Double Program

Table 1: Interest Rate paid to different Deposit liabilities:
Serial Application
Interest rate
1 Savings Bank Deposit A/C 6.00%
2 FDR for 3 months 12.00%
3 FDR for 6 months 12.00%
4 FDR for 1 year 12.00%
5 FDR for 24 months 11.00%
6 Special Savings Scheme 12.00%
7 Fixed Deposit for Corporate Bodies 9.50% (Maximum)

Loan and Advance Product

The NCC Bank is offering the following loan and advance product to the client for financing
different purpose that fulfill the requirements of the bank and have good return to the investment
as well as satisfy the client. The loan and advance products are:
Working Capital Financing
Commercial and Trade Financing
Long Term (Capital) Financing
House Building Financing
Retail and Consumer Financing
SME Financing
Agricultural Financing
Import and Export Financing

Table 2: Interest rate charged on different loans & advances

Serial Application Interest rate
1 Working Capital Financing 14.00%
2 Commercial and Trade Financing 14.50%
3 HouseBuilding Financing 14.00%
4 Retail and Consumer Financing 16.00%
5 SME Financing 16.00%
6 Agricultural Financing 11.50%
7 Import and Export Financing 7.00%
8 Long Term (Capital) Financing 14.00%

Cards
ATM Card
Credit Card (Local, International and Dual)

Remittance Products
Special Interest rate on Savings and Term Deposits
Wage Earners Welfare Deposit Pension Scheme
Loans for Real Estate (Land purchase and House construction/renovation)
Advance against Regular Remittance

Brokerage House
Member, Dhaka Stock Exchange Ltd.
Full Service Depository Participant

Treasury Service
Primary Dealer of Govt. Approved Securities

Remittance Service
Correspondence arrangement with more than 330 Financial Institutions all over the
World for Wage Earners Remittance we have Agency arrangement with 12 reputed
Exchange Houses covering major Locations of our Expatriates

Financial Performance of NCCBL
The NCC Bank Limited is one of the most successful private sector commercial bank in our
country. It has achieved the trust of the general people and made reasonable contribution to the
economy of the country by helping the people investing allowing credit facility.

Profit
NCC Bank Limited registered an operating profit of Tk. 1,267.57 million as of 31 December,
2010.Provision for tax for the year amounted to Tk. 577.29 million with a net profit of Tk.
479.22 million.

Capital
As on December 31, 2010 the authorized capital of NCC Bank Limited amounted to Tk.
2,500.00 million & paid up capital amounted to Tk. 1,201.79 million. The total equity (capital &
reserve) of the bank as on December Stood at Tk. 2,417.37 million. The Capital Adequacy Ratio
is 9.78% as on December 31, 2010 which exceed the stipulated requirements for banks in
Bangladesh.

Deposits
As on December 31, 2010 Total deposits of the bank stood at Tk. 28,147.34 million
excluding call as against Tk. 21,478.22 million excluding call of the previous year.


Table 3: Deposit of NCCBL Tk in million

Year Deposit

2009 21,478.22
2010 28,147.34

Loan and Advances

The Bank recorded a 16.80% growth in advances with total loans and advances portfolio of Tk.
24,678.36 million at the end of December 2010 compared to Tk. 20,533.13 million in 2009.
NCC Bank is making loan and advances in different areas. he bank continues to explore and
diversify its loan distribution with the objective of efficient use of resources and take utmost
precaution to safeguard it. NCCBL also participated in a syndicated loan.

Table 4: Loans & Advances of NCCBL (Tk. in millions)

Year Loans & Advances

2009 20,533.13

2010 24,678.36

International Trade

International Trade is an important constituent of the business portfolio of the bank. The import
value stood at Tk. 17,646.80 million in 2010 with a growth of 7.73% over the volume of
16,296.30 million in 2009. On the other hand, export increased by 9.12% in the year 2010. Total
export volume of the bank amounted to 8,557.00 million. In 2010 compared to Tk7, 776.30
Million in the previous year.
Investment Banking
Lease finance, Hire purchase and Capital Market Operation besides investment in Treasury Bills
and Prize Bonds constitute the investment basket of NCCBL. The investment portfolio made up
of Government Securities and Shares and Debentures of different listed companies stood at Tk.
3,552.08million in 2010 indexing a 15.25% increase over Tk. 3,010.45 million in the previous
year.

Network
NCC BANK LTD. always considers client service the most vital factor to face ever-increasing
competition and challenge in the Banking sector and as such places on it utmost importance.
With that end in view the Bank continued its personalized approach with speed, precision and
accuracy. Presently the number of the branches stood at 57 covering almost al the important
places of the country. The numbers of authorized dealer branches are 17. Moreover worldwide
international correspondents network of the Bank has been continuously expanding covering the
important countries in all the countries of the world. Besides the Bank has arrangement with a
number of Exchange Houses at Singapore, U.A.E., Oman, Qatar, and Kuwait to facilitate
remittances from expatriate Bangladeshis. To cope with modern banking requirement all the
branches are being computerized. To develop expertise on computer operation, regular training
program of computer for the officers are continuing. The bank has been introduced new
computer programs (ON-LINE BANKING) with three branches for improving customer service
and has finalized arrangements with other private commercial banks to introduce ATM. SWIFT
has already been introduced to speed up international transactions and passing of L/Cs at HEAD
OFFICE. SWIFT will soon be introduced at all the A.D branches of the Bank.

About NCC Bank Uttara Branch
NCC Bank Uttara branch situated at House -12, Road no -12, Sector no-6 Uttara model town,
Dhaka. It is one of the busiest banks in uttara. Like other bank it also first thinks about Customer
Service first for this reason I chose this branch for my internship program.
General Banking NCC BANK LTD (UTTARA BRANCH):

General Banking in NCCBL uttara branch is considered as the direct customer service center.
The clients and customers build their impression whether they are going for further dealings with
the bank or not on the basis of their service. Moreover this is the first impression about the bank.
So general section must be taken carefully.


General Banking in NCCBL Uttara branch constitutes with the following sections:
Account Opening Section
Remittance Section
Cash & Computer Section
Clearing Section
Bills Section
FDR & BCD section

Service of Foreign Exchange Department
L/C opening & L/C amendment
Sanctioning PAD, LIM, LTR, Packing Credit
Foreign Bill Purchase
Local Bill Purchase
Foreign Currency Account Maintaining
Foreign Currency Remitting

Service of lone and advance department:
The following are the Loans and Advance Products of National Credit & Commerce Bank Ltd:

Working Capital Financing.
Commercial and Trade Financing.
Long Term (Capital) Financing
HouseBuilding Financing.
Retail and Consumer Financing.
SME Financing.
Agricultural Financing.
Import and Export Financing.


Service of Deposit Products:

The following are the Deposit Products of National Credit & Commerce Bank Ltd:
Current A/C.
Savings Bank Deposit A/C.
Short Term Deposit A/C.
Term Deposit A/C.
Premium Term Deposit A/C.
Instant Earnings Term Deposit A/C.
Special Savings Scheme.
Special Fixed Deposit Scheme.
NFCD.
RFCD.
Money Double Program.

Services: Treasury Service:
Primary Dealer of Govt. Approved Securities

Services: Brokerage House:
Member, Dhaka Stock Exchange Ltd.
Full Service Depository Participant.


Services: Remittance Service:
Correspondence arrangement with more than 330 Financial Institutions all over the
World.
For Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange
Houses covering major Locations of our Expatriates.


Approval, Disbursement and Recovery System of Credit
Loans and Advan
One of the primary functions of commercial banks is sanctioning of credit to the potential
borrowers. Bank credit is an important catalyst for bringing about economic development of a
country. Without adequate finance, there can be no growth or maintenance of a stable economy.
Bank lending is important for the economy, because it makes possible the financing of
agriculture, commercial and industrial activities of a nation. At the same time a bank will,
therefore, distribute its funds among various sectors in a manner as to derive sufficient incomes.
Loans and advances comprise the most important asset as well as the primary source of earning
for the financial institutions.
NCC Bank Ltd. being one of the private commercial bank of the country provides funs to
industry and commerce sector for strengthening the economic base of the country. NCCBL plays
a vital role in the economic prosperity of the country.

Importance of credit:
Credit plays a very vital role in national economy in the following ways-
It provides working capital for industrialization.
It helps to create employment opportunities.
Credit controls almost all kinds of production activities of the country.
Peoples purchasing power increases for it.
It brings social equity.
Cash generation occurs for its successful performance.
Business cycle can run well only by the help of lending system.

Nature of Credit or Advance sanctioned by NCCBL
Lending of money to different kinds of borrowers is one of the most important functions of
National Credit and Commerce Bank Ltd (NCCBL). Major amount of income of this Bank
comes from its lending. NCCBL makes advances to different sectors for different purposes, such
as financing in trade and commerce, imports and exports, industries, transport, house building,
agriculture etc.
Direct Facilities (Funded):

1. Cash Credit: Cash credit or continuous credits are those, which form continuous debits and
credits up to a limit and have an expiration date. A service charge which in effect an interest
charge is normally made as a percentage of the value of purchases. Cash credit is generally
allowed against hypothecation or pledge of goods. Hence cash credits are of two types-
a) Cash credit hypothecation
b) Cash credit pledge.

a) Cash credit hypothecation: Cash credit allowed against hypothecation of goods is known
as cash credit hypothecation. In case of hypothecation, borrower retains the ownership and
possession of goods on which charge of the lending bank is created. The documents, which
create charge of the lending bank on the hypothecated goods is called letter of hypothecation.

b) Cash credit pledge: Under this arrangement a cash credit is sanctioned against pledge of
goods or raw materials. By signing the letter of pledge, the borrower surrenders the physical
possession of the goods under the banks effective control as security for payment of bank dues.
The ownership of the goods, however, remains with the borrower. The pledge creates an implied
lien in favor of the bank on the underlying merchandise.

2. Overdrafts: A loan facility on a customers current account at a bank permitting him to
overdraw up to a certain agreed limit for an agreed period. The terms of the loan are normally
that it is repayable on demand or at the expiration date of the agreement.
3. Loan against imported merchandise (LIM/LTR): This is a loan facility up to a satisfactory
limit to the traders/ customers by a bank against security of the value of the imported
merchandise. This item also includes loan against trust receipts.
4. PAD/BLC/BE: A loan facility provided by the banks to the customers against documents/
bills.
5. Demand Loan: The demand loan is such type of loan the repayment of which is required to
be made after a formal notice is given to the borrower by the bank.
6. Export Credit: All advance facilities provided to the exporters by the banks other than cash
credit.
7. Term Loan: A bank advance for a specific period repaid with interest under fixed schedules is
called term loan. The term loan may be as follows-
a) Short term: up to and including 12 months.
b) Medium term: more than 12 months up to and including 60 months.
c) Long term: more than 60 months.

Indirect Facilities (Non-funded):

1. Guarantee: A credit facility in contingent liabilities form extended by the banks to their
clients for participation in development work like supply of goods and services.
2. Letter of credit: A credit facility in contingent liabilities form provided to the clients by the
banks for import/ procurement of goods and services.
3. Other: All other non-funded facilities, which are not included in any other non-funded
facilities.

Credit Policy of Bangladesh:
A credit policy can be simply described as a decision made in advance. The loan processing
function of a commercial bank is basically a systematic/organized exercise in decision-making.
Decisions made in advance limit the alternate courses of action, which simplify and speed up the
decision-making process. Ability and success of banks in attaining their objectives depends on a
sound credit policy to a very large extent. Commercial bank, however, do not enjoy complete
freedom in formulation and implementation of their credit policy. Because Bangladesh bank
normally formulates the credit policy every financial year. To increase the flow of credit to the
rural or underdeveloped areas, banks are advised to gear up their efforts in this direction aiming
at increasing the credit/deposit ratio in the rural areas for economic development.
Credit Policy of NCCBL:
A credit policy includes all rules relating to loans and advances made by the bank to the
borrowers. It includes types of credit extended by banks, method of judging the credit worthiness
of borrowers, the collateral or securities that are accepted by the banks and so on. This policy
guidelines refer to all credit facilities extended to customers including placement of funds on the
inter bank market or other transactions with financial institutions. Although, unlike other
commercial banks, there is no prescribed and published manual or policy guidelines regarding
credit management in NCCBL, it follows some rules which are very necessary for credit
management. All credit extension of the bank must comply with the requirements of the Bank
Companies Act 1991 and Bangladesh Bank instructions as amended from time to time.
Approach to the Bank:
When a borrower approaches to NCCBL for a loan s/he is required to fulfill the following
criteria-
a) S/he has to be a client of this bank.
b) S/he needs to apply properly describing the purpose of the loan amount needed and his/her
capability of repayment.
After receiving the application from the client, the branch manager scans the papers and decides
if s/he will be allowed for an advance or not. For this manager goes through the following
process.
Borrower Selection:
In borrower selection emphasis is given firstly on 3Ms, which are
a) Man
b) Management
c) Money.

a) Man: The manager has to study the man applied for an advance. For this s/he gathers
information about the applicants character, credit worthiness and social status. To judge the
credit worthiness of borrowers NCCBL follows some basic principles of lending. These are
safety, liquidity, diversification, profitability, suitability, integrity, reliability etc. The manager
can obtain information from Branch Records, Credit Information Bureau (CIB) of Bangladesh
Bank, Personal interviews with the client, Credit Report, Market Information, Financial
Statements (Balance sheet, income statement) etc.

b) Management: Management is the heart of the business concern. So a careful judgment has
to be made about it. It is sought if there are enough experts and technical know how in the
management of the firm. Managements integrity is also need to be evaluated.
c) Money: If management is heart of the business concern, money is blood, which is another
vital factor to survive. A credit manager needs to analyze the debt- equity ratio of the firm. S/he
also needs to be sure if there are sufficient assets to recover the advance.

Financial Data Analysis: Secondly, the credit manager has to compare financial statements of at
least three years. For this s/he takes help of different ratios such as liquidity ratio, solvency ratio,
profitability ratio and activity ratio. S/he also needs to examine bank account statement of the
applicant very keenly. In addition to analysis, the manager should visit the business concern to
get a true picture of it.
a. Industry Analysis: In this part, the manager is required to study the business behavior, which
includes market demand, competitors and government barriers.
b. Lending Risk Analysis: It is a systematic and structural way to assess lending risk, which
covers all the factors described above. Here a form has to be completed by the lending officer. If
lending risk is found to be low, financing can be done and vice versa.
If the applicant is found to be OK after going through all the above process, the branch manager
sends it with other necessary papers to the credit division of the Head Office with his/her own
recommendation. The credit division after appraisal, sends it to the Board (in the case of amount
more than 10 lac) or to the credit committee. The credit committee consists of Managing
Director, one Executive Vice President and one Vice President from International Division. If
the Board/ Credit Committee agree, the proposal is accepted and is sent back to the credit
division. The credit division informs it the branch manager. Following this the branch manager,
maintaining other law and regulation sends a sanctioning letter to the applicant.

Security & facility offer letter (FOL)

1. Preparation of facility offer letter.
2. Processing security offer letter.
3. Preparation and dispatch of security documents.
4. Charge creation of registrar of joint stock companies.
5. Creation of legal equitable mortgage of loan.
6. Co-ordinate legal matters with lawyers.
7. Attending customer queries regarding FOL.
8. Issuance of Bank certificate.
9. Coordinate search and inspection report.
10. Responding to auditors of customers.
11. Renewal of hold letters.
12. Cancellation of facilities.
13. Circulation security tracking list to Senior management on a monthly basis after having RM s
comments.
14. Update and monitor one off facilities of trade services.

Preparation and Dispatch of Facility offer letter:

1. Receive approval for CARM (Credit and risk management) application through lotus notes.
2. Review the approval terms of CRM.
3. Check whether the facilities are in line with Bangladesh Bank and banking companies act
directives.
4. Check the CIB (Credit Information Bureau) report from Bangladesh Bank, Memorandum of
articles & association and search report.
5. Prepare FOL in standard format as per set up service level agreement (SLA).
6. Hand over the draft FOL to the respective RM (Relationship Manager) for checking
amendment and conformation.
7. Discuss with RM regarding different issues of the FOL.
8. Finalize the FOL.
9. Mail the FOL along with security papers to the client for their signing.
10. Receive the duplicate FOL duly signed by the as an indication of the acceptance of the letter.
11. Update SLA tracking, security -tracking list.
12. Review fees will be finalized according to the FOL terms.


Issuance of bank certificate:
1. Receive request from customer or from the auditor issuance of Banks certificate.
2. Verify the signature.
3. Prepare the certificate as the standard format.
4. Realizes charges and VAT.
5. Take signature from the authorized signatories of the bank.
6. Keep a copy of the certificate in credit file.

Cancellation of Facilities:
1. Check the CARM approval for cancellation of facility.
2. Send lotus notes to related departments and RM for no claim confirmation.
3. Upon recipient confirmation from concern departments, delete securities, limits & pre facility
from NCCBL.
4. Prepare memorandum of satisfaction for vacation of Charges.
5. Advise lawyer for preparing the Deed of Redemption for mortgage.
6. Cancel the securities and transfer them to central store.

Loan Disbursement:
1. Receive customers request letter and verify the signature.
2. Check FOL for terms and condition.
3. Check the invoices.
4. Process the loan.
5. Disburse the loan through A5 debit/Credit vouchers.
6. Send the customers advice through courier.
7. File the documents after final checking.



Loan Rollover:
1. Review customers request letter and verify the signature.
2. Check FOL for terms and conditions.
3. Process the rollover.
4. File the documents after final checking in credit file.

Loan Repayment:
1. Receive customers request letter verify the signature.
2. Check FOL for terms and conditions.
3. Cross the letter with red ink and write entry passed on.
4. Process the repayment through A5 debit/credit.
5. File the documents after final checking in repayment file

Important Factors Considered by NCCBL Before Sanctioning Credit:
Though off balance sheet activities play a vital role in a banks earnings, still income earned out
of lending accounts for major portion of income of it. This lending in other words advance may
raise the standard of success of a bank to the highest possible level and at the same time can be a
sole instrument for liquidation (i.e. premature death of a bank) depending on how this portfolio is
handled. So following factors should be given great emphasis.

Who shall get credit?
It is easier to find out a depositor than finding out a good borrower. Public money in hands of a
bad borrower is never safe and secure. Then the question comes whom to lend? In a nut shell the
answer is the entrepreneur who, for attaining his own pecuniary interest as well as mental
satisfaction together with offering additional services and well being to the society at large,
undertakes efforts to collect together various types of necessary goods, labor materials, other
wealth etc and by means of application of his wisdom, foresight, creativity, devotion and self
confidence, takes initiative to add additional utility and value to the collected materials and
wealth by bringing change and or modification in their form. It is widely accepted that a good
entrepreneur is a good borrower.
How much to lend:
Over financing and under financing is very common phenomenon in credit portfolio; neither of
which is desirable as a sound principal of advance. The highest priority of consideration is that
bank credit must not be extended for speculative purpose and sound credit policy always finds
out actual credit need depending on nature, volume, turnover of business as well as capability of
the prospective borrower, which in turns depends on the test of good entrepreneurship. The most
important aspects for consideration is how much a bank can lend taking into consideration its
liquidity position, loan-able fund and commitment already made.

Why to lend:
The recommending as well as sanctioning authority must ascertain and satisfy himself that all
advance are for productive purpose, genuine business and trade need based and neither for
speculative nor for unproductive purpose. It is primary responsibility of recommending officer to
visualize whether the loan, he is recommending for will generate cash to desired extent benefit to
the bank, to the borrower and to the society at large. Bank cannot afford a loan turning bad to the
detriment of institution and the society and for this purpose, the recommending and sanctioning
officer must be acquainted with sound principles of advance and the ways and means to analyze
the risks involved with the proposal processes and the limit sanctioned.
Where to Finance:
Financial activities of a bank, depends upon portfolio management of its funds through deposit.
Banks lending activities may be classified into following broad segments-

a) Trade and Commerce:
This segment encompasses large, medium and small business houses dealing with imported
consumer items as well as shopkeepers, distributors, whole sellers, retailers and small
manufacturers scattered throughout the country. Lending activities of commercial banks in this
segment of trade has traditionally been carried out based on bank-client relationship built up
through interaction and past track record.

b) Industries:
The domain of industrial financing basically comprises of capital financing in the form of term
loans, working capital financing and financing of small and cottage industries. The term loan is
financed for establishment of new industries or for BMRE of existing industries. The core of
NCC Banks lending activities shall be the working capital financing to large, medium and
small-scale industries.
While track record of operational performance of the industries, credit worthiness of the
entrepreneur and reasonable security coverage shall form the basis of lending policies. NCC
bank also set aside some budgetary allocation to finance small-scale industries.

c) Lease Financing:
NCC Bank to keep its contribution to the growth of national GDP, accelerate the total economic
development by infusing the fund in productive sector in more efficient and effective way; thats
why this bank diversify its portfolio and satisfy the customers need and go for lease finance for
various reasons. These are setting up of small and cottage industries/projects, BMRE of existing
projects, transports,
medical equipment, construction equipment and fixed assets of other productive and service
oriented ventures.

d) Consumer Financing:
For the economic development and to help the fixed income group in fulfilling their demand to
upgrade the living standard NCC bank introduce consumer finance scheme for:
1. I. Household appliances.
2. II. Furniture & fixture.
3. III. Air conditioner.
4. IV. Fax machine and cellular phone.
5. V. Motor cycle/ car/ micro bus
6. VI. Other equipments.

e) Real Estate and Civil Construction:
NCC bank financed in this sector on selective basis.
f) Agro-based:
Agriculture is the mainstay of Bangladesh economy being major contributor to the GDP. Thats
why NCC Bank has the keen interest to contribute towards the growth of economy by financing
in the agro-based firms/ industry specially- poultry, fishery and hatchery. Financing will also be
provided to export oriented shrimp culture and fish processing industries.

Credit Administration:
The board of directors being at the highest level of organization structure plays an important role
on the credit administration. The board of directors is not directly concerned with the day to day
operation of the bank. The board has delegated the authority to the managing director. The Head
Office credit committee and other assigned credit officers under the guidance of the managing
director approve, direct, monitor and review lending operations throughout the bank and ensure
that the credit policies are adhered to and the credit operation is conducted in an effective way. In
order to ensure the effective credit portfolio, the board, in turn, monitors the credit department
and ensures placement of qualified officials who have got the right aptitude, formal training in
finance, risk analysis, bank credit procedures as well as required experience.

Figure: Credit Administration of NCCBL

Sound Principles of lending:
Sound principle of lending is obvious to avoid loan default tendency and risk elements to
safeguard of public money as well as business of a bank. So ;there must be a principle of
advance and efforts should be made to make it a sound one for which in depth study must be
made on the following points by the bank:
When the loan is to be given
Why the loan is to be given
How the loan is to be given
What may happen after disbursement of the loan.
Generally what happen (from past experience) after disbursement of the loan.
Is it hopeful that the borrower will repay the loan
Whether loan should be given only in private sector or also in government sector as well
Whether only secured loan will be extended or provision should be kept for clean loan
also
Whether only short term and mid term loan will be considered or long term will also be
considered

Credit risk grading (CRG):

The credit risk analysis package provides a systematic procedure for analyzing and
quantifying the potential risk. Bangladesh Bank has made it mandatory for commercial banks to
use CRG for evaluating credit proposals amounting tk 1 crore.
CRG format is mainly designed for all types of loan except micro credit and agricultural
credit. But it is really impossible to represent all needs in a single format. So, credit officer
judgments are needed in this regard.
CRG at the initial stage relies too much on subjective judgment and financial risk has
been given the maximum weight. Therefore there is always a chance to manipulate the ultimate
risk grading.
Another major impediment to the successful Credit risk analysis is that the information
provided by the borrower often does not suit to feed into the CRG format. Therefore the credit
officers need to employ extra time and effort to collect the relevant information from the
borrower.
Credit risk analysis is a lengthy process requiring sometimes even more than a month of
the lack of information and its subjective nature.

Basically five factors influencing the firms credit risk grading. These are,
1) Financial risk
2) Business risk
3) Management risk
4) Security risk
5) Relationship risk

FINANCIAL RISK:
Financial risk is the risk which is related to firms financial structure. Ratio analysis is one of the
factors of evaluating financial risk

BUSINESS RISK:
Business risk considers the firms type of business. That means the firms dominating power over
the sector in what its operation is conducted.

MANAGEMENT RISK:
Management risk measure the efficiency of firms management is efficient or not for running the
business.

SECURITY RISK:
Every bank wants to give loan on a security basis. They want to see their loan secured. Banks
evaluate the firm on the basis of their capacity of refund loan & interests.

RELATIONSHIP RISK:
In this case bank evaluates the relationship with client, whether the clients maintain their
accounts in the particular bank (loan giver bank)or not.

POINTS:

Financial risk= 50
Business risk= 18
Management risk= 12
Security risk= 10
Relationship risk= 10
These risks may be categorized as under:-

Internal Control and Compliance:
Internal control is the process designed to provide reasonable assurance regarding the
achievement of objectives in the effectiveness and efficiency of operations the reliability of
financial reporting and compliance with applicable laws regulation and internal policies.

Foreign exchange risk management:
Todays financial institutions engage in achieving starting from import export and remittance to
other product. The bank has the risk to manage those services and maintain the credit.

Credit risk management:
Credit risk is the possibility that borrow or counter party will fail to meet its obligation in
accordance to agreement. Credit risk is arising from the bank dealing with large/small party
individuals or other bank. Credit risk management is a process that enable bank manage loan
portfolio in order to minimize loss and earn an acceptable level to return for shareholders.


Asset and liability management:
Asset and liability management are integral part of the bank management. So it is essential to
have a structured and systematic process to manage the balance sheet.
So bank manager are sincere about the balance sheet.

Guidance Notes on Prevention of Money Laundering:
Money laundering is conversion or transfer of property knowing that such property derived from
serious crime for the purpose of concealing the illicit origin of the property .money laundering is
a process vital to making crime worthwhile. Therefore this should be prevented as the money
laundering use the Banks as their means.
Risks that face by NCCBL:
Risks manifest themselves in many ways and the risks in banking are a result of many diverse
activities. NCCBL is also face some risk in this sector .the most prominent financial risks to
which banks are exposed to be:

Balance sheet risk:
Balance sheet risk can be categorized in two major types of significant risk, where liquidity and
interest rate risk. Changes in market liquidity and interest rate exposes bank /business to the risk
of loss which may in extreme threaten the survival of institution.

Interest rate risk:
Interest rate risk is the exposure of a bank s financial condition to adverse movement in interest
rates. So NCCBL also face this risk and maintain this risk they take some action, those are to
address interest rate risk an interest rate profile is prepared where consolidated yield for asset and
liabilities for different maturity bucket are shown for better understanding of profile. Interest rate
risk can pose a significant threaten to a bank earning and capital base change in interest rate
affected a bank earning by changing its net interest income and the level of other interest
sensitive income and operating expenses. An effective risk management process that maintains
interest rate risk within prudent level is essential to the safety and soundness of bank.
Liquidity risk:
Liquidity risk means the danger of running out of cash when is needed to cover deposit
withdrawals and to meet credit requests from the good customer. The major risk a bank runs is
liquidity risk .NCCBL also faces this risk .so NCCBL has to make sure that enough liquidity is
available to meet fund requirements situations like liquidity crises in the market and policy
change by central bank. NCCBL traditionally use the statutory liquidity reserved and their
borrower capital in the volatile intern bank money transfer.

Reputational risk:
Reputational risk poses a major threat to a bank .it defined as the potential that adverse publicity
regarding bank business practices and association whether accurate or not will cause a loss of
confidence in the integrity of the institution. We know NCCBL has there owe reputation in the
market .so NCCBL is very concern about this factor for the bank.

Operational risk:
Operational risk can be defined as the risk of direct or indirect loss resulting from inadequate or
failed internal process people and systems or from external events. NCCBL always concern
about operational risk .they always update there data base and make print copy of every
transaction.

Legal risk:
Legal risk is the possibility that adverse judgment or contract that turns out to be unenforceable
can adversely affect the operations of the bank. Bank may become subject to from the failure to
practice diligence. Banks will be unable to protect themselves effectively from such legal risk if
they do not engage in due diligence in identifying their customers and understanding their
business.

Funding risk:
Funding risk is more likely to be higher in the ease of small banks and those that are less active
in the wholesale markets than large banks. Analyzing deposit concentrations requires banks to
understand the characteristics of their depositors, including not only their identities but also the
extent to which their actions may be linked with those of other depositors. It is essential that
liabilities managers in small banks not only know but also maintain a close relationship with
large depositors, or they will run the risk of losing their funds at critical limes.
Foreign exchange risk/Currency risk:
The risk arises due to unanticipated changes in exchange rates; Foreign exchange risk becomes
relevant due to the presence of multi-currency assets and liabilities in a banks balance sheet.

Credit risk:
Credit risk means when the borrowing customers fail to make some or all of the promised
payment those default loans and securities result a loss it called credit risk.For this reason Credit
Application should be originates from the relationship manager/account officer (RM), and is
approved by Credit Risk Management (CRM). The RM should be the owner of the customer
relationship, and must be held responsible to ensure the accuracy of the entire credit application
submitted for approval. RMs must be familiar with the banks Lending Guidelines and should
conduct due diligence on new borrowers, principals, and guarantors. It is essential that RMs
know their customers and conduct due diligence on new borrowers, principals, and guarantors to
ensure such parties are in fact who they represent themselves to be. All banks should have
established Know Your Customer (K.YC) and Money Laundering guidelines which should be
adhered to at all times.
Contingency Risk
Off-balance sheet items such as guarantees, letters of credit, underwriting commitments, etc. give
rise to the contingency risk. Like other bank NCCBL also face this risk. So NCCBL always
concern about there contingency risk and they take care of that risk.


Risk management
It is noted that risk management docs not aim at risk reduction. Risk management enables banks
to bring their risk levels to manageable proportions while not severely .reducing their income.
Thus, risk management enables a bank to take the required level of exposures in order to meet its
profit targets. This balancing act between the risk levels and profits needs to be well planned

Risk management basically is a 5-step process, which involves:
Identification of risks.
Quantification of the level of exposures.
Policy formulation
Engineering a strategy to transform the exposures into desired form.
Monitoring risk levels and restoring them to standards set.
Identification of Risks
Risk can be anything that can hinder the company from meeting its targeted results. Each risk
must he defined precisely in order to facilitate its identification by the various business units.
This will also enable banks to have fundamental understanding of activities originating the risks.
Such an understanding is essential to evaluate, aspects related to the magnitude of the risks, tenor
and the implications they have on accounting aspects. At any point of time, a bank generally will
be exposed to a host of risks emanating from the exposures. However, if the bank considers
aggregate values of these risks, without considering each risk independently, there may be
improper estimation of risks due to offsetting. To avoid this, all signs of hidden, economic and
competitive exposures are to be considered. This is possible when the bank unbundled the risk
involved in each transaction. This is in fact the most critical step where most of the time needs to
be spent. Unless the bank identifies and understands the nature of exposures involved in a
transaction, it will not be able to manage them. Further, such unbundling also helps the bank in
deciding which risks it will have to manage and which it would prefer to eliminate. The process
of unbundling also helps a bank in pricing.

Quantification of Risks
By measuring its risks, a bank is indirectly identifying the consequences of the decisions taken, if
risks are not quantified, the bank will neither be aware of the consequences of its decisions nor
will be in n position to manage the risks. Thus all risks to which the bank is exposed to need to
be quantified. Quantification of risks is a crucial task and its accuracy depends crucially on the
information available. The quality of information coming/rom its various divisions, however,
depends on the banks reporting system. The information provided needs to be further evaluated
to ensure that there is an effective and ongoing flow of information. Technology and MIS play a
crucial role here.
Setting standards/Policy Formulation:
The next step will be to develop a policy that gives the standard level of exposure that the bank
will have to maintain in order to protect cash flows. Policy is a long-term framework to tackle
risk and hence the frequency of changes taking place in it is very low. Setting policies-for risk
management will depend on the banks objectives and its risk tolerance levels. The risk level set
by the bank should neither be so high that it goes beyond the banks capacity to manage it, nor
should it be so low that the profitability is affected. The bank should decide on a particular risk
exposure level only if it aids in achieving the banks objectives and also if it believes-that is has
the capacity to manage the risk for a gain. If either of the conditions is not met, the bank will
have to try and eliminate/minimize the risk.
Strategy Formulation
A strategy is that which is developed to implement a policy. Clearly then a strategy will be for a
relatively shorter period. Given the exposures and volatilities, a strategy aids in managing these
risks. Firstly, the possible options and the risks attached to them are examined in order to know
the effect of each option on the cash flows and earnings. With this information, a strategy will be
developed to identify the sources of losses/gains, and how efficiently the risks can be shifted to
enhance profits while reducing the exposure. Strategies differ widely depending on the nature of
exposure, the type of transaction, etc. depending on these features, a strategy will also state the
instruments that are to be used to manage exposure, tenors and counterparties.
Monitoring Risks:
Laying down strategies will not lead to risk management since risk profile cannot be static.
Volatile circumstances may change the risk level of the investment and hence require the action
to restore it to the set target level.For instance, the bank takes a long position on a loan of US$ I
inn. At an exchange rate offk. 57.50, the risk the bank is ready to take is up to aTk. 0.10
variation. In absolute term this will be Tk. l lakh. However, the exchange rale goes down by Tk.
0.15 due to which the risk loss to the bank is Tk. 1.5 lakh. This is beyond the target set by the
bank. In such circumstances, the bank can take a long position in USS if it believes that the rate
will move up. And in the case the rates are expected to go down further, it can either enter into a
forward contract or exit from the long position taking up the loss. Either case the bank needs to
have a view about the market regarding its future behavior.
POINTS SECURED REGARDING CRG:
Points Rating
85 or more Good borrower
75-84 Acceptable
65-74 Marginal
55-64 Special mention
45-54 Substandard
35-44 Doubtful
Less than 35 Bad
Credit Monitoring and Review:
In the implied credit rules by NCCBL it is the managers responsibility to monitor the profile and
risk aspect of the credit portfolio. Such monitoring shall be evidenced from the comments of the
manager in monthly call or time to time call and visit reports of the assigned officers and be kept
in the credit file with copy to Head Office. All extensions of credit have to be reviewed and
graded at intervals prescribed by the Head Office. The purpose of this procedure is to monitor
lending performance and to identify potential delinquent credits. The basis of review and
classification are: risk of the transaction, repayment record of the borrower, collateral conditions,
supporting information and documentations and the degree of conformity to bank facilities. The
responsibilities for review and classification of credit facilities start at branch level and finally
ends at the Head Office. Regardless of any formalized times for facility to be reviewed and
formally classified by the branch manager or the concerned credit officer.

Credit products:

As part of earning income, banks have to invest their deposits traditional and conventional
methods like Cash Credit, Secured over Draft Loans in differ ere sectors: HouseBuilding,
Transport & Foreign Trade, etc. All these have become us competitive and made asset
Management of the company very difficult. Also opportunities have become limited thereby
making benefit ratios marginal.

Considering all these; Banks have fortunate some credit schemes based on common needs,
targeted areas for dispersal of their opportunities among them. These, are known as Consumer
finance, Lease finance, Personal Loan, etc. Mainly these have been represented by difference
banks in different name. NCCBL has recently introduced 03 (three) credit product namely
personal Loan, House Renovation Loan,& Small Business Loan to supplement or consumer &
lease finance schemes designed earlier.
Specialty: these are high income yielding loan.

A: Small Business Loan It has been introduced with the following features: -

Target group Small Businessman who are unable to avail of loan as per existing
norms of Bank.
Objectives Dispersal of loan to the committed small business community
Limit Up to Tk. 5.00 Lac (Maximum)
Eligibility Honest, sincere & High performing having more than 5 years
experience.
Refund mode Monthly repayment within 3 to 5 yars
Rate of interest 17% with quarterly rests with application fee Tk. 500/=

B. Personal Loan: Salient features of the Scheme are as follows:

Target group Salaried people of listed organizations
Objectives To meet up certain unwanted emergency expenses.
Limit Up to Tk. 1.00 Lac (Maximum)
Eligibility 50% of their home takes salary and employee of listed companies.
Refund mode Monthly repayment within 3 to 5 years
Rate of interest 17% with quarterly rests. 10% service charge with application fee Tk.
500/=

C. House Renovation Loan: Social features are:

Target group Owners who are unable to meet up repairing/renovation expenses at
from their own source.
Objectives Renovation/repairing of dilapidated houses.
Limit Up to Tk. 1.00 Lac (Maximum)
Eligibility Actual owner of the house having 20 years of construction
Refund mode Repayment by 60 monthly instalments.
Rate of interest 17% interest with quarterly rests. 1% service charge with application
fee Tk. 500/=

D. Consumer Finance:

Target group People of fixed income group
Objectives To procure household commodities for improving standard of living
Limit Up to Tk. 3.00 Lac (Maximum)
Eligibility Acquiring of listed items
Refund mode Monthly repayment within 6 months to 36 months
Rate of interest 17% interest with quarterly rests. 10% service charge with
application fee Tk. 100/=

E. Lease Finance: An entrepreneur, under this scheme may avail of lease facilities to procure
industrial machinery and equipments, Vehicles, etc. (without having to purchase it by down
payment) with easy repayment schedule on case to case basis. Rate of interest under this scheme
is 15% P.A. Recently three more credit schemes have been introduced to expand lending base of
the Bank these are: Festival Business Loan: The scheme designer to help the genuine
businessmen to meet the extra finance required during festivals like, Eids, Puja, Disbursement of
this loan is made in recycling order which is to be stopped 15 days before festival day. Maximum
Tk. 10,000 Lac is allowable under this Scheme @ 15% interest P.A. at quarterly rest.
Application fee is Tk. 500/=

F. Festival Personal Loan: The stymie formulated to meta urgency
.
financial except, the service
holders at the time of festivals like Eids, Puma. Any salaried employee aged but 20-50 years and
working in Govt. Skim Gobi. Autonomous : insurance Co., etv. are eligible to avail of this loan.
The disburse Cement of this loan starts before I month of festival and continues till festival.
Borrower may be allowed travail Foamy. the Tk.15,000% only for minimum 6 months but not
more than 15 quarterly rest. Application fee is Tk.100/-.

G. NCC Bank Housing Loan Scheme:In order to enable the service holder/ professional
businessmen in purchasing Flat/House, Constar Action of Building and renovation the, launched
Housing Loan Scheme from September, 2004. The tenure of the loan is trial, years red maximum
amount of loan, is Tk.5U:00 lac with interest @ 12% P.A

H. Remittance Local and Foreign: Bank also provides remittance services to, i customers both
local and -foreign. Foreign remittance channeled throe Money Gram and placid international and
Express Money helps people in getting money within shortest possible t; from abroad. Local
remittance as usual serving the people effectively.

Classification of Advances:
The prime asset of any financial institution consists of its loans and advances and other
investments. These assets are created primarily out of funds received from the depositors, loans
and some other liabilities. The depositors as well as the investors in the institution are interested
in real /realizable value of the assets of the institutions. The creditors are interested, as they want
to know the depth of risk on their deposits, while the equity holders desire to be acquainted with
viability of their source of income. The management of the institution as well as their supervising
authority i.e. the Central Bank, evaluate the assets of the institution keeping in view the aforesaid
aspects. This evaluation at stipulated intervals is called Classification of Advances. It is in
fact, placing all loans and advances under pre-determined different heads/ classes based on the
depth of risk each and every loan has been exposed to and to bring discipline in financial sector
so far risk elements concerned in credit portfolio of banks.
At present loans and advances are classified under three heads according to degree of risk
element involved these are-
1. Sub-standard
2. Doubtful
3. Bad
1.Substandard: A loan value of which is impaired by evidence that the borrower is unable to
repay but where there is a reasonable prospect that the loans condition can be improved is
considered as substandard.
2. Doubtful: A loan is doubtful when its value is impaired by evidence that it is unlikely to be
repaid in full but that special collection efforts might eventually result in partial recovery.
3. Bad: A loan is considered as bad when it is very unlikely that the loan can be recovered.

Good loans are classified as un-classified loans. Naturally depth of risk is more in doubtful
or bad loans than unclassified ones.

Criterion of classification:
Formerly, loans used to be classified by Bangladesh Bank on qualitative aspect only. Under the
revised system status of loans are determined on the basis of the following five criterion

1. Overdue Criteria
2. Required payment in required period i.e. analysis of payment position of a loan within
stipulated period
3. Legal action i.e. analysis of possibility to realize a loan by legal action
4. Limit overdrawn criteria
5. Qualitative judgment.
Recovery of Advance:
A banks profitability and sustainability mostly depends on the recovery of its outstanding
amount. Outstanding amount includes both principal and interest because, 80% of banks
earnings comes from advances. A poor recovery rate indicates the weak condition of the banking
operation and vice versa. But in the mid 80s, there started a loan defaulting culture, which is still
in practice. As a result, banking sectors as well as the whole economy is facing a great threat
from the defaulters. Money circulation has come down at its minimum level. If this cannot be
checked, whole banking system of our country will collapse one day.

(i) Recovery Procedure:
Recovery procedure is a lengthy one that requires efforts of the bank, society and legal
institutions. It also takes time and money. Like other banks, NCC Bank follows four steps to
recover the outstanding amount. This are-
1. Reminders to the clients
2. Creating social pressures
3. Sending legal notice and
4. Legal action
These four steps are described in detail below-
1. Reminder to the client is given through a formal communication channel. A letter is written
and properly signed on the banks papers. This letter is issued several times to remind the
honorable loaner to repay his/her outstanding portion.
1. If the loan amount is not yet repaid after sending a series of letters, then social pressure is
created on the client by persons referred while opening account in the bank.
2. Legal notice is prepared and sent by NCC Bank when above two steps fails to recover the
amount. It is a threat to the borrower.
3. The last and final step of the recovery procedure is the help from the court. NCC Bank
sincerely tries to avoid this kind of situation for its honorable clients but cannot help
doing for its own sustainability.

Loan Default:

A borrower can default for many intentional and unintentional reasons. There has been a mal
practice of loan defaulting since the mid 80s. This creates a great threat to the financial
institutions.

Location of main risk elements and reasons of loan default:
If the manager/sanctioning authority is aware of the prominent reasons of loan default and risk
elements, he/she can take precautionary measures to minimize risk elements in
recommending/sanctioning/disbursing a loan. There may be hundreds of reasons for loan default
out of which following are the prominent causes-
1. Sick Management
2. Sick Marketing
3. Sick Product
4. Sick Operation
5. Sick Finance
6. Sick entrepreneur.
a. Sick Management: Sick Management means lack of integrity, co-operation, financial/
marketing knowledge and experience, endurance and judgment
b. Sick Marketing: It means lack of freedom, no restriction, openness (no monopoly), depth,
growth and stability.
c. Sick Product: Sick product means lack of quality, competitiveness, demand and durability.
d. Sick Operation: It indicates lack of efficient machineries, skilled labor, good labor relation,
utilities, raw materials, access to transport etc.
e. Sick Finance: It is lack of fund, repayment period, flexible rate of interest, matching to assets,
collateral, efficient capital market etc.


Campari

1. Character
2. Amount of loan
3. Means of repayment
4. Purpose of loan
5. Accountability
6. Risk

5 Cs

1. Character
2. Capacity
3. Capital
4. Collateral
5. Condition








Tools for appraisal credit
Besides the above-mentioned decision, the managers must ensure materialization of following
safe guards for proper use and timely realization of loans, commission, interests etc and
minimize the risk and hazards:

Safety of fund:
Safety means the assurance of repayment of distributed loans. This depends mainly on integrity,
business behavior, and reputation
past experience in the particular line of business, financial solvency, quantum of own equity in
business, capability to run own business efficiently, capacity and willingness to repay the loan
etc, of the loan.

Security:
It must be ensured that repayment of the loan is secured and for this purpose manager must retain
security against loan to fall back upon in case of borrowers default. The securities must possess
required basic qualities such as possession, title deed, parches etc.

Liquidity:
The borrower should have liquid asset so that he can adjust liability on demand and as much as
possible loan itself should be quasi liquid so that it can be realized on demand in case of need.
7. Insurance


Purpose:
Purpose of a loan should be production, development and economic benefit oriented.

Profitability:
This is applicable both for bank and borrower
.
Diversification:
Diversification means the distribute of loan to a large number of borrowers rather to a small
number of borrowers. This will increase the services of the bank and it will reduce the risk of
loan recovery.

National interest:
Nothing can be done legally if it jeopardizes national interest in any way.

Credit Proposal:
Customers come to the Credit Division of the Bank to take loans. Knowing the category of the
loans and the requirements they supply the necessary papers and information.
Credit committee takes that information form credit office and disposes it to the Head office
credit committee. The executive committee takes the decision by the prior decision of the board
of directors whether the load will be sanctioned or not. The decision transferred to the branch
office with the result.


Credit restriction imposed by Central Bank:

At the time of sanctioning loan, the commercial banks must have to follow the restrictions that
are imposed by the Bangladesh Bank from time to time.

Credit Strategies:

General:
The bank shall provide suitable credit services and products for the market it operates. Credit
will be allowed in manners, which will in no way compromise the Banks standards of excellence
and to customers who will complement such standards. Loans and advances shall normally be
financed from customers deposits and not out of short term temporary funds or borrowing from
other banks. All credit extensions must comply with the requirement of Bank companies Act-
1991 and Bangladesh Banks instructions as may be amended time to time.

Nature of Credit or advance Sanctioned by NCCBL:
Lending of money to different kinds of borrowers is one of the most important functions on
NCCBL. Major amount of income of this bank come from its lending.

Direct facilitates:
Term Loan
Continuous loan
Demand loan

Term Loan:
short term industrial loan, mid term industrial loan, and long term industrial loan,
Transport loan
House building loan
Loan against FDR

Short /mid/long term industrial loan:
By industrial credit we mean financing of industrial enterprise in the form of term loan. This may
be categorized as follows:

Short term industrial finance: Term of the loan is equal or less than one year.
Mid term industrial finance: Term of the loan is up to 5 years.
Long term industrial finance: Term of the loan is more than 5 years.
An industrial finance is allowed for the purpose:
To set up a manufacturing facility
To finance for BMRE where B means for balancing, M for modernization, R means for
replacement and E for expansion.
Purchasing of adequate inventories comprising of raw materials, stock in process and
finished goods and extending credit to their customers.

Transport loan:
Any finance, which is given against hypothecation of vehicles like trucks, buses, marine vessel
etc, is termed as transport loan. Advance under transport sector may be allowed for the following
purposes:


Purchase of imported/local assembled Buses, Minibuses, trucks etc.
Import if reconditioned buses is subject to import regulations.
Construction of purchase of water vessels passengers & cargo vessels locally built.

House building loan:
House building loan means loans that are given for construction of buildings or structures to be
used not for residential accommodations of the borrower but for commercial utilization like
renting or sale after the construction.
Loan against FDR:
This kind of loan is allowed by marking lien or creating charge against FDR or other financial
instrument.

Continuous Credit (as working capital finance):

1) Overdrafts
2) SOD (secured overdrafts) against easily en Cashable securities.
3) SOD(secured overdrafts) against work orders
4) cash credit
5) Cash credit(Hypo)
6) Cash credit(Pledge)
7) Overdrafts
8) SOD against FDR

Allocation of loan able funds:

Particulars Percentage (%)
Trade & working capital 45%
Industries 25%
Small industries & various sectoral finance under
Govt.
15%
Real estate & civil construction 5%
Agro-based financing 5%
Lease financing 3%
Consumer financing 2%

Lending interests of NCCBL:

Working capital financing 14%
Commercial and trade financing 14.5%
House building lone 14%
Retail and consumer financing 16%
SME financing 16%
Agricultural financing 11.5%
Import and Export financing 7.00%
Long term financing 14%


CHAPTER-3
Objectives of the Study :

Broad Objectives:

The broad objective of the study is Approval, Disbursement and Recovery Policy of Credit In
NCC Bank Limited over the years of its operations in the Commercial Banking sector in
Bangladesh.

Specific Objectives:
The specific objectives of this study are as follows:
1. Relate theoretical knowledge with practical experience in several functions of the bank.
2. Identify and evaluate different functional services offered by the bank to its clients.
3. The process and the personal involved in the various departments of the bank.
4. To know about the pattern of the clients who are taking the services from the bank.
5. To analyze the financial performance of NCC Bank Limited over the years of banking
operations.

It is observed that the study covers a broad area of Loans and Advances, Loan administration and
performance evaluation of the credits etc. However, the specific objectives of the study are as
follows,

To provide a detailed description of the product for Loan Appraisal Policy.
To analyze the loan evaluation criteria as well as the loan system of Loan Disbursement
and recovery Policy.
To access the loan administration of the bank.
To access the impact of the loan product on the performance of the bank.


Methodology of the Study:

Area of Investigation
As the banking sector is very large, therefore I only focused on specific departments of banks
and taking only consideration of the Approval, Disbursement and Recovery Policy of Credit In
NCC Bank Limited, where I have been assigned to serve as a interne.

Source of Information:
The study is conducted on the basis of both primary and secondary data.

Primary data

The primary information was gathered through interviews, observation and group discussion.
The primary data are collected from all the departments specially Credit Department of NCC
Bank Limited, Uttara Branch by interviewing personal of the respective departments. The heads
of the departments of senior executives have been interviewed. However, the analysis and the
explanation are the authors own.

Secondary data

The secondary information was gathered through Annual Reports, Periodic Publication of the
Bank, Brochures, Credit Manuals and Loan Administration Manual, Financial Statements of the
banks, website, etc. The data of the study are based on a review of existing broachers,
documents and database of NCC Bank Limited.

Limitations of the Study:

In every Research work there exist some limitations that the researchers faces where conducting
different activities. In the process of the research work, I came across certain limitations that
hamper the actual findings and analysis of my research work. Some of the constraints that I have
faced while conducting the research work are as follows:

The interviewees, who are the personnel involved in the various departments of the bank,
may not be well acquainted with the formal procedures of the research work. The
respondents may be biased on certain issues that hamper the total evaluation of the
research work.

A structured filing procedure is often neglected which also poses difficulty in
understanding the sequential procedure.

The study conducted can be hampered, as the total evaluation of the industry cannot be
covered in a short period of time. In short period of time the actual phenomenon on the
performance of the various departments of the bank can just be highlighted and some
issues were overlooked.

The personnel of the bank are usually busy with their daily activities and routine tasks;
therefore interacting with them during their office hours was difficult sometimes.
Although most of the officers were very helpful and friendly but as because they have
been busy with their works, they could not give enough time to light up my knowledge
about the Banks activities.

Lack of proper books, journals and articles available for the banks, sometimes created
limitations for me to understand the banking terms and conditions.

The banking policies and manuals of NCCBL are of confidential in nature and thus it is
difficult to collect the necessary literature and documents within this short time.

None the less, I tried my level best to make this report a good one and despite of many
limitations in my approach, I expect that the reader of this report will a boarder view and idea
about the Approval, Disbursement and Recovery Policy of Credit In NCC Bank Limited.

The limitations faced in conducting the study are

A more comprehensive knowledge of the subject matter might have helped to carry out a
more thorough study.

Continuous modification in the policy offering is another limitation judging the
performance of loan recovery.

Most of the data used in the report are given on an approximate basis due to banks
tendency towards confidentiality. It also served as a major limitation.

CHAPTER-4 FINDINGS OF THE STUDY

Ratio Analysis

Profitability ratio

Return on equity =
2007 =1,400,664,725/5,273,277,362 =26.56%
2008 =1,231,832,174/6,696,770,778 =18.39%
2009 =2,784,218,989/11,745,223,217 =23.71%
2010 =3,002,876,567/16,768,521,255 =17.91%


Return on asset =

2007 =1,400,664,725/79,588,430,798 =1.76%
2008 =1,231,832,174/110,437,103,311 =1.12%
2009 =2,784,218,989/124,806,383,846 =2.23%
2010 =3,002,876,567/152,796,945,827 =1.97%


Net interest margin =

2007 =(7170099616-5266592564)/79588430798 =2.39%
2008 =(9095891683-7126309505)/110437103311 =1.78%
2009 =(10856416291-8426118565)/124806383846 =1.95%
2010 =(12023158687-7789506602)/152796945827 =2.77%


Earning per share =

2007 =1,398,792,999/22,750,000 =61.49
2008 =1,231,832,175/35,546,875 =34.65
2009 =2,784,218,989/51,212,521 = 54.37
2010 =3,002,876,567/52,774,028 = 56.9


Retained earnings per share =

2007 =1,112,009,852/22,750,000 =48.88
2008 =1,054,921,127/35,546,875 =29.68
2009 =2,217,834,432/51,212,521 =43.31
2010 =2,691,260,736/52,774,028 =51.00


Retention Ratio =

2007 =1,112,009,852/1,581,382,798 =70.32%
2008 =1,054,921,127/1,547,592,026 =68.17%
2009 =2,217,834,432/3,135,678,230 =70.73%
2010 =2,691,260,736/3,798,836,049 =70.84%

Operating Profit Margin Ratio =

2007 =(4816210375-1559345650)/79588430798 =4.09%
2008 =(5777810297-1930955801)/110437103311 =3.48%
2009 =(8195606688-2906887699)/124806383846 =4.24%
2010 =(9680806328-3602929761)/152796945827 =3.98%

Net profit Margin Ratio =

2007 =1,398,792,999/4,816,210,375 =29.04%
2008 =1,249,015,183/5,819,245,747 =21.46%
2009 =2,823,473,302/8,262,859,422 =34.17%
2010 =3,798,836,049/9,680,806,328 =39.24%

Asset Utilization (AU) =

2007 =4816210375/79588430798 =6.05%
2008 =5819245747/110516618171 =5.27%
2009 =8262859422/124984702326 =6.61%
2010 =9680806328/152796945827 =6.34%





Equity Multiplier (EM) =

2007 =79588430798/5273277362 =15.09
2008 =110516618171/6708227542 =16.47
2009 =124984702326/11796677214 =10.59
2010 =152796945827/16769945827 =9.11


Tax Management efficiency Ratio =

2007 =1398792999/3 256864725 =42.95%
2008 =1249015183/3864393665 =32.32%
2009 =2823473302/5328807974 =52.99%
2010 =3798836049/6077876567 =62.50%



Expense control efficiency ratio (ECE) =

2007 =3256864725/4816210375 =67.62%
2008 =3864393665/5819245747 =66.41%
2009 =5328807974/8262859422 =64.49%
2010 =6077876567/9680806328 =62.78%




Asset management efficiency ratio (AME) =

2007 =4816210375/7 9588430798 =6.05%
2008 =5819245747/110516618171 =5.27%
2009 =8262859422/124984702326 =6.61%
2010 =9680806328/152796945827 =6.34%



Funds Management efficiency ratio (FME) =

2007 =79588430798/5 273277362 =15.09
2008 =110516618171/6708227542 =16.47
2009 =124984702326/11796677214 =10.59
2010 =152796945827/16768521255 =9.11

Leverage Ratio

Total debt =

2007 74,315,153,436/79,588,430,798 = 93.4%
2008 103,740,332,533/110,437,103,311 =93.9%
2009 113,061,160,629/124,806,383,846 =90.6%
2010 136,028,424,572/152,796,945,827 =89.0%



Equity Multiplier (EM) =

2007 =79,588,430,798/5,273,277,362 =.934
2008 =110,437,103,311/6,696,770,778 =.939
2009 =124,806,383,846/11,745,223,217 =.906
2010 =152,796,945,82716,768,521,255 =.890

Efficiency ratio

Operating efficiency Ratio =

2007 =1,559,345,650/4,816,210,375 = 32.4%
2008 =1,930,955,801/5,777,810,297 =33.4%
2009 =2,906,887,699/8,195,606,688 =35.5%
2010 =3,602,929,761/9,680,806,328 =37.2%


Employee productivity ratio =

2007 =4,816,210,375/1,400 =3440150.268
2008 =5,777,810,297/1,551 =3725216.181
2009 =8,195,606,688/1,844 =4444472.174
2010 =9,680,806,328/2,139 =4525856.161



Asset Utilization (AU) =

2007 =4,816,210,375/79,588,430,798 =6.1%
2008 =5,777,810,297/110,437,103,311 =5.2%
2009 =8,195,606,688/124,806,383,946 =6.6%
2010 =9,680,806,328/152,796,945,827 =6.3%

Comments on Performance of NCCBL

Name Means Comment
Profitability Ratios:
ROE Return on Equity Measures the fund management
efficiency.
More efficient in 2007 than
others but decreasing trend in
2009.
ROA Return on Assets measure the asset management
efficiency for a company
It is seen that NCCBLs RAO
is fluctuating, shows the poor
performance then 2009.
Net Interest
Margin
How much the company earns interest by using each
amount of asset.
Shows the better performance
in 2010, gradual increase from
2008.
EPS EPS represents the number of currency earn during
the period on behalf of each outstanding share of
common stock. Higher the ratio indicates higher net
income the share of stock is generating.
In 2007 they earn highest
61.49 Tk. On behalf of each
outstanding common stock, In
2010 show gradual increase of
EPS from 2008.
Retain
Earning Per
Share
It measures how much of the net income has been
retaining after paying out all dividends.
In 2010 they retain 51 Tk.
After paying all dividends
which is gradually increase
after 2008.
Retention
Ratio
It shows the percentage of net income that is
retained in the bank after paying of all dividends.
In 2010 bank has the highest
ratio after the big fall after
2008.
Operating
Profit Margin
Ratio
Measure how large a spared between total operating
revenues and total operating expense of a bank that
management has been able to achieve by using their
asset.
In 2009 the bank earn highest
4.24 tk by using 100 tk and
decrease in 2010.
Net profit
margin ratio
Highest the result show the
better performance and in 2010
it shows the best result.
AU It measures the percentage of each taka remaining
after all cost and expense including interest tax and
preferred stock dividend has been deducted. It
reflects the effectiveness of expense management
cost control service pricing policies the higher the
Banks NPM indicates more percentage is
contributing to profit.
The bank earn highest 6.61 tk
by using 100 tk asset in 2009,
fall down at 2010 (6.34).
EM A higher equity multiplier indicates higher financial
leverage, which means the company is relying more
on debt to finance its assets.
In 2009 and 2010 the bank use
less liability than 2008, shows
the good performance.
Tax
Management
Efficiency
Ratio
The higher ratio indicates the bank could efficiently
manage its tax expense.
Increasingly shows the good
performance from 2008 to
2010.
Expense
Control
Efficiency
Ratio
The higher ratio indicates the bank could efficiently
manage its expense.
Continuously show the bad
performance due to increase of
the man power, increase
branch and other expense.
AME It indicates if the ratio is higher the performances is
better in asset management.
It shows the little fluctuation
performance during the year
and in 2009 it shows better
then 2007and 2010.
FME It indicates if the ratio is higher the performances is
better in fund management.
It shows the poor performance
in 2010 then 2007, 2008, and
2010.
Leverage Ratios:
Total debt
ratio/ leverage
ratios
It indicates the proportion a firms total asset that is
financed with borrowed funds. That means out of
total how much amount is financed by liability.
The bank financed more than
its 90% of asset with borrowed
funds but decrease in 2010.
EM A higher equity multiplier indicates higher financial
leverage, which means the company is relying more
on debt to finance its assets.
In 2009 and 2010 the bank
relying less liability than 2008,
shows the good performance.
Efficiency Ratios:
Operating
Efficiency
Ratio
It measures whatever the revenue is being generated
by the bank from operation, whether it is that
enough to cover all operating expense.
In 2010 the bank cover almost
38% of operating expense from
its revenue shows the good
performance the other years.
Employee
Productivity
Ratio
It is used to measure the operating efficiency of the
bank by increasing the productivity of the
employees through the use of automated equipment
and improved employee training.
In 2010 the banks employees
provide their best performance
then other years.
Asset
Utilization
(AU)
It measures the percentage of each taka remaining
after all cost and expense including interest tax and
preferred stock dividend has been deducted. It
reflects the effectiveness of expense management
cost control service pricing policies the higher the
Banks NPM indicates more percentage is
contributing to profit.
The bank earn highest 6.61 tk
by using 100 tk asset in 2009,
fall down at 2010 (6.34).

SWOT Analysis of NCCBL

Strength:

1) Sound profitability growth and high asset quality.
2) Experienced management.
3) Honest, sincere, and dedicated employee competency.
4) Wide market share and stable source of fund.
5) Largest network.
6) High attention on recovery of overdue amount and or pre-overdue situation.
7) Close monitoring on investment clients.
8) High attention on individual performance.
9) High attention on making quality investment and disposal of proposals.
10) All the officials/ manpower are dedicated and honest to serve its own duty.
11) Business ethics of the division is similar to the ethics ands values of mass people of our
country.

Weakness

1) Traditional network system and lack of full scale automation.
2) Lack of required ideas in modern investment products.
3) Poor marketing of investment products.
4) Lack of required information specifically on SME.

Opportunity:

1) Scope of market penetration through diversified investment products.
2) Increasing awareness among the clients.
3) Scope of develop new committed entrepreneurs.
4) Country wide branches having wide opportunities to access in different kinds of business.
Threats/ Challenges:

1) Challenge of new entries
2) Challenges related to substitute organization
3) Entrepreneurship development.
4) Misgivings/ wrong propaganda

From the Topic Loans and Advances chapter of the report, the overall Credit approval,
disbursement and recovery process have been clarified. Now in the Findings chapter, the report
will focus on the actual outcome that was the result of the topic analysis. The section of the
report will contain Findings on Credit Assessment stage, Qualitative Analysis of Credit and
overall findings that have an impact on the Business Environment of NCC Bank limited.

Findings on credit Assessment stage

Credit assessment involves rigorous analysis on the prospective borrower, his business and
required loan amount. NCCBL has a set of professionally sound credit officers who are able to
carry out the job of credit assessment with utmost meticulousness. Yet there are some loopholes
in their activities, which may expose the Bank of Credit Risk situations. Major observations are
as follows

Checking Political Connection of Borrower: A significant factor in assessing the
credit-worthiness of a borrower is his/her connection with any political party or pressure
group, which may benefit or damage the business performance of the borrower when
there is a change in political regime. The Credit Officers of NCCBL do not precedes any
personal that connects any political connectivity.



Dealing with Influential Borrowers: Supervision of large loans by credit officers tend
to be less effective because the big borrowers are influential personnel in the society and
seen to establish and maintain contact with the top executives of the Bank. Big borrowers
are in a position: (1) to exert irresistible influence over the credit officers for actions in
their favor and (2) to dictate their credit terms. As per credit policy, NCCBL do not show
any relaxation in credit terms sanctioned to any influential borrower. Although many of
the borrowers of NCCBL are powerful and influential, the Branches do not face any
difficulty in implementing prudential regulations of Bangladesh Bank and credit policies
of NCCBL Head Office, because they are very choosy for selecting a borrower. Genuine
business houses are always welcome to NCCBL.

Proper Valuation of securities: The bank normally takes into consideration the present
market value of collaterals as assessed by the nominated surveyor of the Bank. The
forced sale value of collateral security exceeds the lending amount, the loan is
sanctioned. Thus, NCCBL consider market value of mortgaged property under forced
sale situation when loans become bad and stale, and disposal of assets become inevitable.

Adequate Collateral Security: The collateral securities taken by NCCBL from the
clients against their credit facilities always covers probable risk of default. Inadequacy in
collaterals takes place due to two reasons: (1) clients reluctance in committing adequate
collateral assets against the loan taken (mostly happens with powerful borrowers). (2)
banks lenience in enforcing adequate collaterals to be committed by the borrowers.
NCCBL is very alert for these two purposes.

Qualitative Analysis
NCCBL invests its assets in the different portfolios
comprising borrowers from different industries and sectors.
Usually the loans are given to following categories/ sectors:

Working capital
Commercial Loans
Term Loan
Small Business Loan
Trade finance/ Foreign Exchange
Miscellaneous loan

Working Capital Loans

NCCBL displays an increasing preference for working capital loans which comprise mostly of
revolving lines of credit. The working capital loans inflict lower degree of credit risk upon the
Bank as these are short term loans and renewed from period to period if the borrowers display
satisfactory repayment behavior. This signifies a good credit risk management strategy of
NCCBL.

Commercial Loans

Commercial loans are normally the short term revolving lines of credit extended for importing
raw materials. As these loans are given against sufficient security, e.g. repayment performance
of borrowers, credit risk exposure from such loans is lower for the Bank. NCCBL normally
maintains a large concentration of commercial loans. Yet proportions of such loans over the
stated periods display an increasing trend.




Term Loans

Term loans are mostly the large loans for which the bank is exposed to maximum credit risk due
to the probability of large volume of default from a smaller number of loans. These loans are
good only when the bank can take adequate collateral securities against them. But most of these
loans are given to the big and influential borrowers who seem to be reluctant in offering adequate
collaterals against their loans. Yet NCCBL has been maintaining large concentrations of big-
sized term loans over the periods. This is due to the fact that processing, monitoring and recovery
of a small number of large loans are more cost-effective and convenient than that of a large
number of small loans.

Small Business Loans

Small Business Loans are small-sized loans which individually expose the bank to small
quantum of credit risks. The bank does not seek sufficient securities against the small borrowers
as per the instruction of Bangladesh bank. This is due to the fact that processing, monitoring and
recovery of large number of small loans require larger costs and efforts.

Trade Finance/ Foreign Exchange

These are mostly the credit facilities in the forms of letters of credit and other financing
instruments extended to the imports and exports. There is also a decreasing trend in Trade
Finance due to the world wide recession. The Bank earns handsome returns from this indirect
loan facilities in relation to the degree of risk involved.

Miscellaneous Loans

NCCBL extended to various in an attempt to explore new loan areas and also to diversify its loan
portfolios. This is evident from the declining volume of miscellaneous loans over the stated
periods.
Overall Findings

Loan Approval, Disbursement and Recovery Policy is a key product for NCC Bank Limited as
it contributes a good portion to the overall profitability of the bank. The balance sheet and
income statement show that it is very profitable bank. Its sales as well as the number of loans
distributed have been increasing steadily over the years.

During the course of the undertaken study, several findings have been stumbled upon with which
have been summarized and discussed below-

1. The bank is constantly expanding and improving its performance.
2. The credit approval policy of NCCBL is very conservative.

1. The loan administration of NCC Bank Limited enables it to ensure a smooth loan
disbursement and monitoring system.

1. The empirical evidence of the product suggests that it is performing quite well and
contributes a good portion of the overall profitability of the bank.

1. Over the years the amount of loan approved and disbursed seems an increasing trend of
Loans and advance.

1. The segmentation analysis further suggests that among the borrowers, the working
capitals are the highest which help the country to develop.

1. Although the current offering for the loan is a lucrative one, there is still scope for further
improvement which would be beneficial for the bank as well as the borrowers.

1. The customer services provided by NCC Bank Limited are superior level due to large
affiliation and strong brand image.


Financial institutions have always played an imperative role in strengthening the economic
infrastructure of the country. Banks such as NCC Bank Limited has been at the forefront on the
role. Among its various products, credit Appraisal policy plays an important role in maintaining
its profit. Although right now the products contribution, in comparison to the products is not that
high, it can certainly hoped that with proper modification and policy change it will surely
become a large profit earning sector for the bank. The different features of the product identifies
it as a convenient way for the consumers avail loan for a variety of purpose and the loan
evaluation criterias also help to assess the different aspects of the product applicants.

Finally it can be argued that Credit Appraisal and Recovery policy of NCC Bank Limited has
been operating as per the desired direction. However, I have identified some loopholes of the
program that needs special attention. I hope that if the existing problems are addressed properly
the bank will be able to expand the program as per their target and it will continue to provide
more revenues in maximizing the wealth of the bank in the years to come.

CHAPTER-5 CONCLUSION & RECOMMENDATION
CONCLUSION

Since the banking services especially the private Banks are doing a good business, it is clear that
modern people are more concerned about securing their valuable assets and get high-quality and
timely services. For this reason lot of new commercial banks has been established in last few
years. These banks have made this banking sector very competitive. So, now banks have to
organize their operation and do their operations according to the need of the market. Banking
sectors no more depends on the traditional method of banking. In this competitive world this
sector has trenched its wings wide enough to cover any kind of financial services anywhere in
this world. The major tasks for banks, to survive in this competitive environment is by managing
its assets and liabilities in an efficient way.

The study was conducted on Approval, disbursement and recovery system of credit carried out
by NCC Bank Limited. Analyzing the procedures of credit Approval, disbursement and
recovery system over the years of operation is main objective of this study. As the study was
concentrated towards the Loans and Advances, therefore, few limitations occurred while
conducting the study. In spite of having many challenges, adverse economic conditions and
market patterns during the year NCCBL proved to be successful by offering quality and timely
services to its customers.

On the basis of convincing reasons, NCC Bank Limited management believes that in the
coming years the bank will try its level best to sustain its earning capacity and maintain a steady
growth. With the current performance of the Bank and with little improvement here and they will
certainly make NCC Bank Limited one of the best Private Bank in Bangladesh in the near
future.

RECOMMANDATION

NCC Bank Limited are engaged in promotional activities, it should go for aggressive
advertising and promotional activities to get a broad geographic coverage. They should make
some plans for all the branches located in different areas, so that the branches can get the
maximum exposure from the surrounding areas. Some recommendations for NCC Bank
Limited are as follows:
More outdoor promotions such as Billboards can be set up in the commercial areas as
well as the rural areas to make awareness among the clients. In DhakaCity there are very
few billboards and advertisements of NCC Bank Limited, so the bank should increase
the number of outdoor promotions. Advertisements in the national daily newspapers and
electric media can be given to make customers aware of the new product/service features
available.

More personal selling staffs and employees can be appointed to make ore exposure of the
bank.

NCCBL should increase the number of retail banking products set up a permanent Retail
Banking Department in all the Branches (especially on Dhaka City) as the number of
customers taking the services of Retail Banking are increasing day by day

As in todays context the decoration of a branch is to be highly concerned by an
organization, therefore NCC Bank Limited will also be take the renovation of the
building into consideration.

Filing procedure of NCC Bank Limited should be maintained in a definite and clear
manner. The filing of the papers submitted by the clients and other related documents
should have to maintain in more specific manner than it followed at this moment. It will
save time and energy of the employees and the documents will be secured.


Decision making process can be made more decentralized. Participative approach should
be adopted to gain prompt and effective result. Group discussion can be practiced in
some situations to make quick decision making.

NCC Bank Limited should focus more on the Small and Medium Enterprises, as this
sector has the market potential to grow. Along with the Garments sector, the bank should
also encourage businessman and entrepreneurs to take Loans and invest in different
sectors such as Jute Industry, Leather Industry, Chemical Industry and Ship building etc.

Expand the export business of NCC Bank Limited for more export financing to
minimize the difference between export and import financing.

Information system should be more developed. NCCBL should increase the usage of
Internet fore local and international correspondence. Computer Division needs to be up
dated and extensive for the greater welfare for the branches. The use of modern
communication software can be used for faster transaction delivery to the clients. The
Online Banking of NCC Bank Limited is to be implemented properly.

An uninterrupted network system has to be ensured by the bank. It will serve the officials
from much hassle and will save time.

The credit sanction procedure should make quicker since competition is very hard in
todays business world. People do not want to wait for three to four weeks on an average
to get a loan which is even protected by security.

A little more service quality up gradation may help the bank to hold on to old customers
and avail more new customers. For this purpose the Bank should open up Customer
Service Departments in all the branches and Research and Development Division in the
Corporate Head Quarter to understand customer needs more accurately.
REFERENCES

v Annual Report of NCCBL of year 2007,2008,2009,2010,2011
v Eugene F. Brigham, joel F. Houston ; Fundamental of financial management;9
th
edition
v Lyn M. Fraser, Understanding Financial Analysis
v NCCBL training Institute guide.
v M.akhar ,Banking theory and practices-6
th
edition
v www.nccbank-bd.com
v www.google.com
v www.bangladesh-bank.org.

APPENDIX

Questionnaire

Satisfaction level of consumer regarding NCCBL consumer credit (Sample-5)


Reasons
Highly
Satisfied


Satisfied

Moderate

Dissatisfied

Quick Service 5 35 10 0
Lower interest
rate
0 14 16 20
Technology 6 10 20 14
Communication
system
30 15 5 0
Banks reputation 25 20 4 1
Availability of desired
Banking
10 8 12 20
Longer repayment
period
15 13 14 18