Chapter 1:

Background of the Study

1
1.1 Introduction
Credit management in a bank is a dynamic sector where a certain standard of long-range
planning is needed to allocate the fund in diverse field and to minimize the risk and
maximizing the return on the invested fund. The objective of the credit management is to
maximize the performing asset and the minimization of the non-performing asset as well
as ensuring the optimal point of loan and advance and their efficient management. The
credit policy of IFIC Bank is a combination of certain accepted, time tested standards and
other dynamic factors dictated by the realities of changing situations in different market
places. IFIC Bank aims to become one of the leading banks in Bangladesh by prudence,
flair and providing quality of credit operations in the banking sectors. International Finance
Investment and Commerce Bank Limited (IFIC), intends to meet the needs of their clients
and enhance their profitability by providing best credit facilities. The study is an effort to
evaluate the credit management performance of International Finance Investment and
Commerce Bank Limited (IFIC).

1.2 Objectives of the Study

The main objective of this study is to evaluate the credit management performance of IFIC
Bank Ltd., Chawkbazar Branch. In order to achieve the main objective following are some
specific objectives:
1. To outline the credit disbursement process of IFIC bank Ltd., Chawkbazar branch
2. To evaluate the credit management performance of IFIC bank Ltd., Chawkbazar
branch
3. To identify the problems and suggesting recommendations to overcome the
problems in credit management of that branch

2
1.3 Methodology of the Study

For preparing this reports both secondary and primary data are used where their sources
are given below:
Primary data sources:
The sources of primary data can be summarized as:
 Face to face conversation with officers & executives of the bank
 Practical work exposures form different desks of the bank.
 Informal conversation with the clients.
 Observation at bank during internship duration.
Secondary data sources:
 Annual reports.
 Official documents.
 Affairs of Branch.
Data analysis: Collected data are analyzed with the help of various statistical tools like
mean, ratios etc. as well as different diagram like bar-diagram, pie-chart etc.

1.4 Limitations of the Study

The report is subject to some limitations during its preparation. These are as follows:
 Lack of sufficient data.
 In-depth information as well as collection of quantitative data was not possible because of
organizational confidentiality.
 The busy schedule of the bank officials was an obstacle in the collection of data.
 Most of the questions have been aimed to collect qualitative data and state of mind of the
respondents. Analyzing such qualitative data is difficult and often produces inconclusive
results.
 The time frame of the research was only limited to two months.
 My inexperience was one of the notable limitation

3
 Chapter 2:
Organizational Profile

4
2.1 Origin of the IFIC Bank Ltd

The International Finance Investment and Commerce (IFIC) Bank Limited is a private
commercial bank in Bangladesh. The majority of the shares are owned by the Government
of Bangladesh. In 2013 IFIC announced planned to become a sharia compliant bank.
International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking
company incorporated in the People’s Republic of Bangladesh with limited liability. It was
set up at the instance of the Government in 1976 as a joint venture between the Government
of Bangladesh and sponsors in the private sector with the objective of working as a finance
company within the country and setting up joint venture banks/financial institutions
abroad. The Government of the People’s Republic of Bangladesh now holds 32.75% of the
share capital of the Bank. Directors and Sponsors own 11.31% of the share capital and the
rest is held by the general public.
SI. Capital Structure Amount Tk.

1 Initial Authorized Capital 20000 Million

2 Initial Paid-up Capital 3460.50 million

3 Total Assets 91796.8 Million

5
2.2 Capital of IFIC Bank Limited
IFIC was incorporated as a public limited company with an authorized of Tk. 200 million
and paid up capital of Tk. 100 million. IFIC commenced its operation on February 28,
1977 with a subscribed capital of Tk. 50 million, contributed by lending private sector
entrepreneurs in the country. The Government held 49 percent shared and the rest 51
percent were held by the sponsors and the general public.

2.3 Corporate Vision & Mission Of IFIC Bank Limited

Vision

To be among the best service provider in the industry by ensuring customer satisfaction
through the application of the technology, professionalism and nursing.

Mission

To be the best private commercial bank in Bangladesh in terms of efficiency, Capital

adequacy, asset quality, sound management and profitability.

2.4 Objectives of IFIC Bank Limited

 To be a dynamic leader in the financial market in innovating new products as to the
needs of the society.
 To earn positive economic value addition (EVA) each year to come.
 To top the list in respect of cost efficiency of all the commercial Banks.
 To become one of the best financial institutions in Bangladesh economy
participating
In the most significant segments of business market that we serve.
2.5 Slogan of IFIC Bank Limited
“Your Satisfaction First “

6
2.6 Automation in IFIC Bank Limited
Since the beginning of its journey as a commercial bank in 1983, IFIC Bank has been
giving great emphasis on the adoption of modern technology. It became the pioneer in the
field of automation by introducing computerized branch banking right in the same year.
Subsequently, all the branches were brought under similar automated platforms with
upgraded software applications to offer all the critical banking features. At present all 65
domestic branches are fully computerized under networked environment. Besides, the
Bank is also operating fully on-line Automated Teller Machine (ATM) services under the
banner Q-Cash at a number of locations in Dhaka and Chittagong. The ATM facilities are
available to the customers at Q-Cash booth.
2.7 Functions of the IFIC Bank Limited
 The main task of the IFIC Bank Limited is to accept deposited from various
Customers through various accounts.
 The bank invest its fund in it to profitable sector.
 Provides loans on easy terms and condition.
 Above all, IFIC Bank helps the businessmen financially by giving discount facility
for bill of exchange and by providing the Facility of letter of Guarantee.
 It creates deposit.
 It transfers money by Demand Draft (DD), Pay Order (PO), and Telegraphic
Transfer (TC) etc.
 It brings the increasing power of the dimensions of transaction.

7
 2.8 Operational network organogram of IFIC Bank Limited

Operational Network Organogram of IFIC Bank Limited

Board Director

Managing Director

HEAD OF
HEAD OF HEAD OF
HEAD OF HEAD OF INTERNATI
HEAD OF RESEARCH & SMALL AND
RETAIL ADMINISTR ONAL
BRANCH DEVELOPME MEADIUM
BANKING ATION DEPARTM
NT ENTERPRISE
ENT

HEAD OF
HEAD OF HEAD OF HEAD OF HEAD OF INFORMATION
HUMAN HUMAN FINANCE & CREDIT &
RESOURCE RESOURCE ACCOUNT TECHNOLOGY

8
2.9 Products and Services of IFIC Bank Limited

Since commencement of banking operation, IFIC Bank Limited has not yet gained
enormous popularity but also been 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 consumer-friendly loan and deposit products.
All the products and services offered by the bank can be classified by the method below:
2.9.1 Deposit Products

 Savings Account.
 Smart Savings Account.
 Super Saving Plus-More Money.
 Current Account.
 Fixed Deposit Receipt (FDR)
 Special Notice Deposit (SND)
 Pension Savings Scheme.
 School Savings Plan – A Plus.
 Three Years Deposit Plus (3YDP)
 Double Return Deposit Scheme (DRDS)
 Millionaire Dream Plan (MDP)

Some of the deposits products are discussed below:

Saving Deposit Account (SB a/c)

The deposit is basically meant for small-scale savers. There is restrictions on withdrawals
money in a month.

 5% interest is provided to depositors.

 The minimum amount of balance to be maintained with this type of account is
tk. 1000.
 A depositor can withdraw two times in a week for more withdrawal depositors
are not entitled for any interest.
 To withdraw above tk. 20000 the depositors has to notice.
 No savings account will be allowed to be overdrawn.

9
Fixed Deposit Receipt (FDR a/c)

A fixed deposit (FD) is a financial instrument provided by banks which provides investors
with a higher rate of interest than a regular savings account, until the given maturity date.
It may or may not require the creation of a separate account.

 Anyone Interested person can open FDR account.

 It is safe then other account.
 Interest for FDR is
1 Month – 4.00 %
3 Month –5.75 %
6 Month - 6.00 %
 Interest will be given according the deal.

Pension Saving Scheme (PSS a/c)

This scheme is to make the customer introduced to the banking system under this schemes
the customers are to pay a certain of money at monthly interval up to a period of 3 to 5
years.

 Generally opened by small sever.

 Minimum amount tk. 500 and maximum Tk. 5000
 Interest rate 8 % for 3 years maturity and 7.5 % for 5 years maturity period.
 Maturity 3 to 5 years.

10
2.9.2 Loan Products

 IFIC Easy Loan

 Consumer Durable Loan

 Parua (Education Loan)

 IFIC Home Loan

 IFIC Salary loan

 Any Purpose Loan

 IFIC Marriage Loan

 CNG Conversion Loan

 IFIC Medical Loan

 IFIC Holiday Loan

 IFIC Peshajeebi Loan

 IFIC Auto Loan

11
 Chapter 3:
Credit Disburse Process of IFIC Bank
Limited, Chawkbazar Branch

12
3.0 Credit Management

This is the survival unit of the bank because until and unless the success of this section the
survival is a question to every bank. If this section is not properly working the bank it-self
may become bankrupt. This is important because this is the earning unit of the bank. Banks
are accepting deposits from the depositors in condition of providing interest to them as well
as safe keeping their interest. Now the question may gradually arise how the bank will
provide interest to the clients and the simple answer is – Loan. Why the bank provides
Loan to the borrowers –

a. To earn interest from the borrowers and give the depositors interest back
b. To accelerate economic development by providing different industrial as well as
agricultural advances
c. To create employment by providing industrial loans
d. To pay the employees as well as meeting the interest groups

Credit is continuous process. Recovery of one credit gives rise to another credit. In this
process of revolving of funds, bank earns income in the form of interest. A bank can invest
its fund in many ways. Bank makes loans and advances to traders, businessmen, and
industrialists. Moreover nature of credit may differ in terms of security requirement,
disbursement provision, terms and conditions etc.

This section has been analyzed in this report in the following manner-

1. Types Of Loan Provided By The Branch

2. Selection of the borrower
3. process of the loan
4. Recovery System
5. Regulation

13
3.1 Types of Loan

According to the borrower need bank provide various types of loan. But the total loan is
divided into two categories. These are –

3.1.1 Consumer Finance

1. Easy Loan (Secured Personal Loan)

2. Consumer Durable Loan
3. Parua Loan (Education Loan)
4. Thikana (House Building Loan)
5. Peshajeebi Loan (Loan For Professional)
6. Auto Loan
7. Festival Loan
8. Flexi Loan
9. Any Purpose Loan
10. Marriage Loan
11. Home Decoration Loan
12. CNG Conversation Loan
13. Medical Loan
14. Holiday Loan

Requirements:

a. Age limit: Minimum age 25 years and maximum age 60 Years.

b. Loan size: Minimum Tk. 100000 and Maximum Tk.500000 ( Depend on the
nature of the loan)
c. Disbursement Mode: Loan general/ overdraft/ Term Loan.
d. Rate of Interest: As prescribed or as revised from time to time.
e. Penal Interest: Additional 2% P.A on the overdue amount.
f. Repayment Method: Equal monthly installment.
g. Service Charge: 1% on loan amount to be realized before disbursement of loan

14
 h. Required documents:
 2 copy passport size photograph from the intending borrower.
 CIB Report on the borrower
 Letter of arrangement
 Letter of disbursement (for loan)
 Letter of installment (for loan)
 Letter of continuity (for SOD limit)
 Letter of lien on security
 Surrender form (for ICB unit certificate)
 Personal guarantee of spouse/parents
 Memorandum of deposit of claques
 Bank statement for minimum last 6 month
i. Legal Documents:

3.1.2 Small and Medium Enterprise Finance

1. Easy Commercial Loan

2. Retailer Loan
3. Transport Loan
4. Commercial House Building Loan
5. Possession Right Loan
6. Contractor’s Loan
7. Letter Of Guarantee
8. Working Capital Loan
9. Letter Of Credit
10. Loan Against Imported Machinery
11. Loan Against Trust Receipt
12. Bidder’s Loan
13. Project Loan
14. Woman Enterprise Loan
15. Muldan Loan
16. Phalphesali Rin
17. Krashi Seranjam Rin
18. Gabadi Poshu & Motso Rin
19. Sech Saranjam Rin

15
Requirements:

1. Nature of loan: Overdraft or Loan General

2. Age limit: Minimum 21years and Maximum 65 years
3. Rate of interest: Basis on the nature of the security
4. Penal interest: Additional 2% per annum on the overdue amount.
5. Disbursement mood: overdrawing the CD account/credit to party’s CD account in the
case of loan general.
6. Disbursement pre-condition:
 Acceptance of sanction terms
 Clean CIB report
 Payment of all charge
 Deposit of instrument duly discharged
 Execution of all charge document
 D.P Note
 Letter of arrangement
 Letter of disbursement (for loan)
 Letter of installment (for loan)
 Letter of continuity (for SOD limit)
 Letter of lien on security
 Surrender form (for ICB unit certificate)
 Pledge set up confirmed by CDBL
7. Legal document:
8. Tenor
9. Service charge

On the basis of the nature loan in divided in to two categories:

 Term loan
 Industrial loan
 Agriculture loan
 House building loan
 Transport Loan
 Loan general (Easy Loan)
 Flexi Loan
 Continues loan

Working capital loan

 Cash Credit ( hypo)
 Cash Credit ( pledge)
 Secured Overdraft

16
3.2 Selection of the Borrower

Credit activities are the risky step for any types of the bank especially commercial bank.
For this riskiness the deposit are collected from the depositor that means the amount of
money the bank giving as a loan is ready to delivered it to depositor when he needs. On
the other hand loan activities are the main source of banking earning. For getting assurance
to recover the loan bank critically examine the loan and loan borrower depending on the
information. This process is called borrower selection process or credit analysis. In 1975
Jack R Chigger the bank specialist describes the importance of 5 C’s in credit analysis and
it’s a very popular process. The processes are PARSER, CAMPERI and 5R’s Model.

Figure 03.1: Processes of PARSER, CAMPERI and 5R’s Model

As bank lends its depositors money, the employment of such fund is therefore, required to
be made judiciously so that it comes back in the ordinary course of business. So right
selection of the borrower mostly ensures repayment of the fund. Right selection needs a
careful and systematic study of the affairs of the intending borrower. At the time of
selection of the borrower credit management should consider the following five ‘C’s.

 Character
 Capacity
 Capital
 Collateral &
 Condition

17
Before forwarding and advance proposal there are some yardsticks to select the right
borrower. These are:

a. Borrower’s loan applications

b. Reports obtained through friends or rivals especially from the borrower in same line
of trade or business
c. Borrower’s own mode of dealings
d. Statement of accounts with other bank
e. Statement of assets and liabilities
f. Balance sheet, profit & loss statement of accounts for three years
g. Income tax statement
h. Trade and other report in the press
i. Confidential reports from other banks
j. Personal contact and interview

A banker must satisfy himself about the following before forwarding an advance proposal
to the sanctioning authority with his recommendations:

a. Date of opening of the account – nature of truncation – average balance – present

balance.
b. Business – its nature – dealing items – average turnover.
c. Purpose of financial accommodation
d. Nature of primary security
e. Collateral security – if any
f. Period for which the accommodation sought for
g. Repayment method
h. Personal characteristics of the borrower
i. Business experience

j. Credit worthiness of the applicant:

 Investment of the business

 Other source of income – if any
 Market reputation – goodwill
 Other investment – if any
 Financial obligation – if any
 Audited Balance Sheet, Profit and Loss account

k. Location of the business

l. Banker’s confidential status report
m. CIB report

18
After studying the borrower’s documents, the credit manager is to take decision whether
the borrower may be provided advance or not. If the analysis borrower selection is positive,
the credit manager can give loan or credit to the selected borrowers.

3.3 Procedures of Loan Appraisal

3.3.1 Collection of Application

Applicant applies for the loan in the prescribed form of the bank describing the types and
purpose of loan.

3.3.2. Approval Process

The responsibility for preparing the credit proposal would rest with the RM within the
corporate/commercial banking department. Credit proposal shall be recommended for
approval by the RM team and forwarded to the approval team within CRM and approved
by individual executives.

The recommending or approving executives shall be responsible and accountable for their
recommendations or approval.

Figure: APPROVAL PROCESS

1. Proposal forwarded by RM (Branch Manager) to Head of Credit (CRM).

2. HOC/CRM Executive advise the decision as per delegated authority to RM ( Branch
Manager)
3. HOC supports & forwards to Deputy Managing Director.
4. Deputy Managing Director advises the decision as per delegated authority to HOC.
5. Deputy Managing director supports & forwards to Managing Director

19
 6. Managing Director advises the decision to Deputy Managing Director/ HOC.
7. Managing Director presents the proposal to Board.
8. Board advises the decision to Managing Director.

Any decline credit may be re-presented to the next higher authority for
reassessment/approval through HOCB. However there should be no appeal process beyond
the Managing Director.

a) De Duplication Check

All approved application must be checked against banks database to identify whether
the applicant is enjoying any other loan in other account apart from the declared loans.
It must also be checked that the applicant has a credit card (if the bank offers this
product) and any payment default is made this should be mandatory for credit card
approval. In such cases the application must be rejected.

b) Maintenance of Negative Files

Two negative files – one listing the individuals and the other listing the employers –
are to be maintained to ensure that individuals with bad history and dubious integrity
and employers with high delinquency rate do not get personal loan from bank.

3.3.3 Credit Administration

The credit administration function is critical in ensuring that property documentation and
approvals are in place prior to the disbursement of loan facilities. For this reason, it is
essential that the function of credit Administration be strictly segregated from relationship
management/marketing in order to avoid the possibility of controls being compromised or
issues not being highlighted at the appropriate level.

3.3.4 Security Types

A big aeration of income of bank comes from advance. The success of bank and flow of
its profit depend on how efficient and safely in makes best use of its available resources,
capital and deposit by making advances to various types of borrowers. In allowing advance
sound judgment of a banker is very much needed. The main factor for successful advance
is ability to judge the character and credit worthiness of the borrower. The security offered
for an advance is only a cushion an insurance to fall back upon in case of need. A banker
would not normally like to recover the advance from the sale of the security. Security serves
as a safely value for an unexpected emergency. If they are left out there are chances that
the borrower may raise funds from elsewhere by charging them to other.

20
Forms of Securities

Charging a security means making it available as a cover for an advance. Security taken by
a bank as cover of such advance may generally be classified as under.

a) Personal / Movable: Personal security involves a personal right of action against the
customer or third party. The following may be grouped under this type of security-

 Personal Bond
 Personal Guarantee
 Promissory Note

b) Impersonal / Immovable: Impersonal security is something that can be realized by

sale or transfer. The following grouped may be under this type of security-

 Land
 Stocks
 Shares
 Goods

c) Direct / Indirect: Direct the customer himself deposits security. Third party to
secure a customer’s account deposit indirect security. The following may be grouped under
this type of security.

 Advance against FDR/Life polices in the name of the borrower himself

 Advance against FDR/Life polices in the name of person other than the borrower

d) Primary: Primary security is that which is regarded as a cover for an advance. The
following grouped may be under this types of security-

 Advance against pledge of Good/Stocks

 Advance against pledge of FDR
 Advance against hypothecation of Good/Stocks
 Demand Promissory Note

e) Collateral: Collateral securities mean those securities, which run parallel to or side
by side with personal right of action against a debtor in respect of an advance. The
following may be grouped under these types of security. Share certificates, bearers bond,
title deeds, life policies etc. deposited by a customer. Any instrument or instruments that
secure the debt and personal guarantee from a third party government guarantee made by
Bangladesh Bank.

21
 Eligible Security % to be Considered

Market value of gold /ornaments kept in banks custody 100%

Duly discharged financial instruments like FDR, PSP, Govt. Bond 100%

Guarantee made by the government / Bangladesh Bank 100%

Easily marketable goods pledge under banks custody 50%

Market value of mortgage land and building 50%

Share certificate 50%

Table 03.1: List of eligible securities with their percentage of value

3.3.5 Credit Documentation

Credit Documentation dept. is responsible-

 To ensure that security document complies with the term of approval.

 To control loan disbursements only after all terms and conditions of approval have been
met, and all security documentation as per the checklist of approved PPG is in place.
 To maintain control over all security documentation. To monitor borrower’s compliance
with agreed terms and conditions, and general monitoring of account
conduct/performance.
 Upon performing the above, documentation dept. will forward the limit and other
information to input into the bank’s main system.

3.3.6 CIB Report

The word CIB refers to the Credit Information Bureau.

For the purpose of financing a big project, lending institution should be assured about
entrepreneur’s activities, Social status and financial conditions. To lower the loan risk,
banks must collect information regarding borrower from CIB when the loan required is
more than 50 Lac. The information may be –

 Whether any information about bankruptcy against applicants.

 Whether there is any sue against applicants.
 Whether they have took any loan, which is not repayment.

22
To collect information about applicant, the particular branch has to contact with
Bangladesh Bank through the head office of the particular bank. It is notable the only the
information of party is maintained in CIB.

Process to complete CIB Report

There are some prescribed forms to prepare a CIB report. The form of a CIB report can be
divided into four segments,

 Segment – 2
 Segment – 3
 Segment – 4
 Segment – 5

Segments – 2

It contains the debtor’s information (owners only). Bank branches need not to require
submitting segment-1 if the borrower is an individual. This segment contains two boxes.
The left hand box contains a set of codes against appropriate owners. The right hand box
contains branch serial number, Name of the bank and Name of branch.

Segments – 3

This segment contains debtor’s information (Group & affiliation).

a) Group name and Address:

When a borrower belongs to a declared group of industries / companies, the name of the
group should be reported against group name and its permanent business address.

b) Affiliations:

There are four boxes under this head

1. Affiliation
2. Parent
3. Subsidiary
4. Sister / allied concern.

23
Segment – 4

It includes the credit information matrix. The columns of the matrix contain much
important information of debtors, which are generally available at the end of scheduled
banks. These are sanctioned limit, disbursement, outstanding, due for recovery, overdue,
economic purpose, codes, security codes, classification etc.

On the other hand, loans or advances include cash credit, overdrafts, on current accounts,
loans against imported merchandise, term loans etc.

Segments – 5

Guarantor’s information is reported in this segment. Bank branches should report the name
of the guarantor along with his/her father’s name and addresses of the guarantors in the
appropriate spaces provided in this segment

3.3.7 Risk Measurement

A. Credit Risk: The credit risk is managed by the consumer credit & collection unit
(CCCU), which is completely segregated from sales. The following elements contribute to
the management of credit risks:

 Loans will be given only after proper verification of the customer static data and after
proper assessment & confirmation of income related documents, which will objectively
ascertain customer’s repayment capacity.
 Proposals will be assessed by independent credit division (CCCU) completely separated
from sales.
 There will be dedicated collection force that will ensure timely monitoring of loan
repayment and its follow up.

Contact point verification is done for all applicants except for the high net worth (HNW)
individuals or customers having account relationship with banks.

The external CPV include residence, office and telephone verifications. All verification is
done to seek / verify / confirm the declared/undeclared information of the applicant.

B. Third Party Risk: In case of other Banks deposit/security instrument, the branch shall
send the instrument to the issuing office and also their head office, for verification and
written confirmation on lien marking and encashment of the instrument.

24
C. Liquidity and Funding Risk: This risk will be managed and the position monitored by
the assets liability committee headed by the managing director/CEOs of the banks.

D. Political Economical Risk: Political and economic environment of a country play a big
role behind the success of business. Bank should always keep a close watch in these areas
so that it is able to position itself in the backdrop of any changes in country’s political and
economic scenario.

E. Operational Risk: For the consumer loans, the activities of front line sales and behind
the scene maintenance and support are clearly segregated. Consumer credit & collection
unit (CCCU) will be formed.

CCCU will manage the following aspects of the product:

 Inputs, approvals, customer file maintenance, monitoring, collection;

 The operation jobs like disburse in the system including raising debit standing orders and
the lodgment and maintenance of securities.

It will ensure uncompromising checks, quick service delivery, uncompromising

management of credit risk and effective collection & recovery activities.

3.3.8 Disbursement

Security documents are prepare in accordance with approval terms and are legally
enforceable. Banks standard loan facility documentation that has been reviewed by legal
counsel should be based on authorization from an appropriate executive in CRM.

Disbursements under loan facilities are only be made when all security documentation is
in place. CIB report should reflect/include the name of all the lenders with facility, limit &
outstanding. All formalities regarding large loans & loans to Directors should be guided by
Bangladesh Bank circulars & related section of Banking companies Act. All credit terms
have been met.

3.3.9 Custodial Duties

 Storage of security documents shall be maintained at the branch jointly by two

authorized officers within RM Team.
 Appropriate insurance coverage is maintained (and renewed on a timely basis) on
assets as per sanctioned terms.
 Security documentation is held under strict control, preferably in locked fireproof
storage.

25
3.3.10 Compliance Requirement

 All required Bangladesh Bank returns are submitted in the correct format in a timely
manner.
 Bangladesh Bank circulars / regulation are maintained centrally, and advise to all
relevant departments / branches to ensure compliance. Department / Branches shall
also maintain the circulars/regulations and advise down the line to ensure
compliance.
 All third party service providers (valuators, lawyers, insurers, etc.) are approved and
performance reviewed on an annual basis.

3.4 Recovery Management

3.4.1 Monitoring

Bank’s loan portfolio should be subject to a continuous process of monitoring. This will be
achieved by regular generation of over limit and overdue reports, showing where facilities
are being exceeded and where payments of interest and repayment of principal are late.
There should be formal procedures and a system in place to identify potential credit losses
and remedial action has to be taken to prevent the losses. Beside that the systems should
be in place to report the following exceptions to relevant executives in credit / sales and
branch marketing staff-

 Past due principal or interest payments

 Timely corrective action is taken to address finding of any internal, external or
regulator inspection/audit.
 All loan facilities are reviewed annually
 Computer system should be able to produce the reports for central / head office as
well as branch review.

3.4.2 Early Alert Process

An Early Alert account is one that has risks or potential weakness of a material nature
requiring monitoring, supervision, or close attention by management. An early alert report
shall be completed by the RM and sent to the approving authority in CRM for any account
that is showing signs of deterioration within seven days from the identification of
weaknesses.

Moreover, regular contact with customers will enhance the likelihood of developing
strategies mutually acceptable to both the customer and the bank.

26
3.4.3 Recovery Process

The collection process for personal loans starts when the account holder has failed to meet
one or more contractual payment (installment). It therefore becomes the duty of the
collection department to minimize the outstanding delinquent receivable and credit losses.

This procedure has been designed to enable the collection staff systematically recover the
dues and identify / prevent potential losses, while maintaining a high standard of service
and retaining good relations with the customers.

To identify and manage arrears, the following aging classification is adopted-

Days Past Due Collection Action

(DPD)

01-14 Letter, Follow up & Persuasion over phone

15-29 1st Reminder letter & Sl. No. 1 follows

30-44 2nd reminder letter + single visit

45-59 3rd reminder letter

group visit by team member

follow up over phone

letter to guarantor, employer, reference all above effort follows

warning on legal action by next 15 days

60-89 Call up loan

Final reminder & serve legal notice

Legal proceedings begin

repossession starts
90 and above Telephone call and legal proceedings continue

Collection effort continues by officer agent

Letter to different banks association

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