Credit Risk Management

Lending is one of the main functions of a commercial Bank. n formulating a credit judgment the credit
officers of BRAC Bank must be equipped with all information needed to evaluate a borrower.

n all kinds of business dealings, officers and employees must be guided by the principles of honesty,
integrity and safeguard the interest of the depositors and shareholders of the Bank. They should strictly
adhere to the Banking Laws, Rules and Regulations of the Govt. of Bangladesh, the instructions issued
by the Bangladesh Bank/Head Office from time to time that affect the business practices of the Bank.
Credit Risk Management is defined in six wings.
(1) Wholesale Credit
(2) Retail Underwriting
(3) SME Underwriting
(4) Central Collection Unit
(5) Special Asset Management, SME and Retail Banking.
(6) Special Asset Management & Credit nspection, Wholesale Banking & Medium Business

(1) WhoIesaIe Credit & Medium Business
To understand Wholesale/ Corporate Credit, we first need to understand, who will be considered as a
corporate client. Other than individual, business entities such as proprietorship concern, partnership
concern, co-operative society, club, Non-Government Organization (NGO) and limited company both
public and private are considered as corporate client.
Corporate Credit means a Contractual agreement in which a corporate client receives something of value
now and agrees to repay the lender the principle with interest at some later date.
Thus, the credit decision taken in approving a loan means that the bank is lending money to the corporate
client.
Objectives of the Team:
The objectives of the team are as follows:
- Managing credit risk
- Managing credit risk exposure
- Compliance with the rules/guidelines of Bangladesh Bank
- Compliance with the rules/policies of BRAC Bank

ResponsibiIities of the Team: Broadly, support Approval and post disbursement Monitoring. At a glance
overall the team responsibilities are as follows:
a) Analyze various corporate organizations and their debt structure.
b) Conducting credit reviews, discuss with Head of Corporate Banking as appropriate.
c) For new transactions/customer, analyze, ensure compliance with BBL and BB guidelines, ensure
compliance with relevant checklists/policies, ensure purpose and justification are satisfactory, identify
all risk issues, and place the proposal to Chief Credit Officer with recommendation by Head of Credit,
Wholesale Banking & Medium Business.
d) Develop and maintain peer group analysis for a particular industry sector.
e) Ensure excess documentation is reviewed and completed within the relevant time scales.
f) Actively develops relations with Front office and provides exceptional service and advice.
g) Monitoring the entire corporate portfolio after disbursement, maintaining updated database, preparing
various reports for internal and external purpose, and preparing Basel reports for Bangladesh Bank.
h) For each corporate relationship, credit rating is mandatory as per BB guidelines, which is to be
verified by CRM, i.e. Wholesale Credit team.
i) Monitoring of Early Alert Accounts (EAA) which may be reported due to breach of Terms and
Conditions, incomplete documentation, overdue nature, financial deterioration, management
problems, etc.
j) Post-disbursement activities such as Portfolio Review, reviewing stock report, factory/godown/office
visit, preparing Consolidated Exception Report for Credit Committee, preparing Expired and Excess
Over Limit (EOL) accounts report, etc.
k) Review credit exposure by risk grade. Conduct adequate trend and migration analysis to identify any
deterioration in credit quality. Report on Credit Concentration on the basis of risk grade and migration
analysis.
Types of faciIities we can offer to Corporate CIient: Broadly two types: (i) Funded and (ii) Non-funded.
(i) Funded faciIity: means financing through cash.
Product types:
a. Overdraft: A convenient and flexible form of short-term financing for routine operating
expenses and overheads of the company.
b. Import and Export Loans: Under this category products are Payment Against Documents
(PAD), Loan Against Trust Receipt (LATR), Revolving Loan (RL), nland Bills Purchase/
Discount, etc.
c. Long Term Ioans: Under this category products are Term Loans, Lease Finance, which we
extend to finance the fixed assets the corporate business needs (such as equipment,
machineries etc.). t may be a Greenfield project or an expansion of an existing plant.

(ii) Non-funded faciIity: non-involvement of fund/cash. Banks extend this type of facility against some
documents to third party on behalf of corporate clients.
Product types:
a. Import and Export Loans: Letter of Credit.
b. Guarantees and Bonds: Performance Guarantee, Advance Payment Guarantee, Bid Bonds.

Syndication Loan:
Syndication means joint financing by more than one bank to the same client against a common
security. This is done basically, to spread the risk. t also provides a scope for an independent
evaluation of risk and focused monitoring by the agent / lead bank.
PortfoIio: WhoIesaIe credit (WC) team mainIy Iooks after two kinds of portfoIio.
1) Under Corporate Business, WC team assesses and approves proposals from
a. Large Corporate: Financing businesses which are already established in the industry in which
they operate.
b. Emerging Business: Financing businesses which are still in their infant/ early years of
operation and would require financing to nurture and sustain the growth of business.

2) a) Medium Business: Financing businesses which have crossed their early years but has not yet
become a large corporate entity as per our definition.
b) Shomriddhi Loan (previously known as Trade Plus) and Shompod Loan (previously known as
Business Equity Loan) under Small and Medium Business (SME) as their nature of facilities
coincide with that of Corporate loans.
ApprovaI Authorities of the Corporate Loans:
. Head of Credit, Wholesale Banking & Medium Business
. Chief Credit Officer
. Managing Director & CEO
V. Board
The approval authority may change time-to-time based on business volume and person behind the desk.
Bangladesh Bank guidelines are always followed irrespective of the limit.
Due to large ticket size of loan facility, most of the proposals received by Wholesale Credit team are
approved by the Board of Directors.
Members of Credit Committee:
At present, Credit Committee consists of four persons:
a. Managing Director & CEO
b. Chief Credit Officer
c. Head of Corporate Banking
d. Head of Credit, Wholesale Banking & Medium Business
SingIe Borrower/Group Exposure Iimit:
As per Bangladesh Bank BRPD Circular no.05 dated 09.04.2005, banks can extend credit facilities to
single borrower/group up to 35% of bank's total capital except export oriented organization / borrower, but
funded facilities not exceed 15% of bank's total capital at any point of time. However, BRAC Bank policy
is to take exposure to single / group borrowers up to 30% of its capital, but funded facilities not exceed
15% of total capital.
AnaIyzing tooIs and techniques to evaIuate a corporate proposaI:
General 5C's are-
1. Character - ntention to pay loan- Management structure, Age, successor, experience etc.
2. Capacity - Borrower's competence in the field of employment to fund profitability, ability to generate
income and capability to repay the loan - Financial analysis, ratio analysis, cash flow etc.
3. CapitaI - Financial strength to recover the risk- nvestment
4. Conditions - ts business condition- ndustry analysis, Demand Supply analysis, Supplier buyer
analysis etc.
5. CoIIateraI mplies additional securities- Comfort at time of default for e.g. in the form personal
guarantee from directors of the company.

Large Loan:
As per Bangladesh Bank BRPD Circular no.05 dated 09.04.2005, loan granted to an individual,
organization, or group of companies or institutions, which is 10% or above the Bank's Capital would be
treated as Large Loan.
Lending Cap:
Lending Cap means establishing a specific industry sector exposure cap to avoid over concentration in
any one-industry sector. BRAC Bank's policy is to take total exposure of maximum 20% in one particular
industry.

(2) RetaiI Underwriting

Retail Underwriting is a wing of Credit Risk Management which deals with Retail Loans of the Bank. Total
retail underwriting is done from this wing. There is a prescribed PPG for each product & on the basis of
that PPG, retail loans are approved.

Retail Underwriting is comprised with the following sub units:
a. Retail Credit
b. Cards Credit
c. Authorization & Fraud Control
d. Central Verification Unit (CVU)
a. RetaiI Credit
Currently Bank is offering Retail Loans under Retail Credit in following three categories:
a. Unsecured personal Loan
b. Secured Loan
c. Cash Covered loan.
There are some common features for each eligible income group who can apply for retail loan if he/she
can meet the criteria of Product Program Guide (PPG).The beneficiary can use the money for any
purposes except Auto Loan and House Building Loan. All retail loans are EM (Equal Monthly nstallment)
based loans other than Secured Overdraft facility.
Customer Segment:
Salaried: Type A: Employees of reputed MNCS and large local corporate, foreign NGOs, Aid
agencies, UN bodies etc.
Type B : Employees of medium/small sized or mid/small-range local companies such as
reputed schools, pathology labs, hospitals, restaurants, newspapers, airlines, travel
agencies, real estate developers, insurance companies, reputed NGOs, trading firms and
business establishments and Government Employees etc. The employees must maintain
salary account with a bank.
Self Employed Professional/Businessman: Doctors, Architect, Engineers, Chartered Accountants etc. and
Businessmen means Owner, Partner, Director, Proprietor of any organization.
Land Lord: Landlords having stable source of earnings from rented property(s).
Unsecured PersonaI Loan:
Unsecured personal loan is clean loan product where no cash security is taken against the loan.
Currently BRAC Bank is offering two Types of Unsecured Personal Loans.
Quick Loan
Salary Loan

Quick Loan: BBL introduced Quick Loan in November 2007. This loan is offered to the Businessman and
self employed person like Doctors, Architect etc. Businessmen with minimum 3 (three) years business
experience in a single nature of business. ncome assessment is done on the basis of bank statement.
Borrower needs to provide last one year's bank statement. This is an "any purpose loan. Maximum Loan
amount is BDT 10 Lac and minimum loan amount is BDT 1.5 Lac. Maximum loan tenor is 5 years
depending on income and loan amount. Two personal guarantee is required one is from immediate family
and another from neighbor businessman. The loan can be topped up after 9 months of successful
payment.

SaIary Loan: Salary Loan introduced in May, 2003. t is a term loan facility offered to individual salaried
persons to cater his/her personal need. Maximum loan size BDT 10 Lac and minimum is BDT 1 Lac.
Maximum loan tenor is 5 years depending on income and loan size. Personal guarantee required from
spouse. f spouse not available then siblings/parents/close relatives guarantee required. This is an any
purpose loan; however, the applicant must need to mention the purpose of the loan clearly in the loan
application form.
Secured Loan:
There are two secured retail loans offered by BRAC Bank.
1 AuLo Loan
2 Pouse 8ulldlng Loan

Auto Loan: Auto Loan is a term loan facility for the middle class to upper class people of the cities where
the bank has its operations to purchase new and reconditioned (unregistered) vehicles for their personal
use. BBL introduced Auto Loan on May 2003.

Salaried, Self Employed Professional/ Businessman and Land lords are eligible for Auto Loan. Maximum
loan amount is BDT 20 Lac and minimum loan amount is BDT 2 Lac. Maximum loan tenor is 5 years
depending on Manufacture date of the car. Maximum 6 years old reconditioned car can be purchased.
The car is to be registered in the name of borrower and the Bank jointly. Loan to value ratio is 50%. A
hypothecation is created over the car. Processing time for car loan is 72 hours. Maximum age for
applying for car loan is 65 at the time of maturity.
ouse BuiIding Loan: BRAC Bank Limited has launched House Building Loan in January 01, 2008 to
satisfy the housing need of its customers. The purpose of this loan is to purchase of under construction /
completed flats / apartments or construction / extension/ renovation of house or flats. Maximum loan
amount is BDT 1 Crore and minimum is BDT 5 Lac.
Customer Segment: Salaried, Self Employed Professional/Businessman and Land Lords
100% Cash Covered: Wage earners/NRB maintaining resident a/c with us or any other bank and anybody
wants HBL against cash security
HBL scheme has been designed in two categories, one is Home Loan and another is Home Credit.
Home Loan: f loan is given for purchase of under construction / completed flats / apartments then is
called Home Loan. Maximum loan tenor for salaried is 25 years and for others is 20 years.
Home Credit: f loan is given for construction / extension/ renovation of house or flats then it is called
Home Credit. Maximum Loan tenor for Home Credit (renovation) is 10 years. Other than renovation
purpose loan tenor for salaried is maximum 25 years and others is 20 years.
Application Criteria: Though house building loan is a personal loan, co applicant(s) is (are) also required.
Owners of the property must be the main borrower. f property owner and financial eligible person happen
to be different then also property owner will be the main borrower. Co applicants' income can also be
added with main applicant's income.
Collateral: Since HBL is a secured loan product there is a requirement for collateral. Borrower needs to
create registry mortgage of the property in favor of BBL. For Home Loan there is an option for creating
Tripartite agreement between borrower, property developer and Bank where property is to be mortgaged
in favor of bank within specified time period. The specific time depends on developers' category. f
developer is non categorized then TPA facility is not provided and borrower needs to create mortgage
before disbursement. For Home Credit registry mortgage creation is mandatory before disbursement
Legal vetting, valuation and Title search: Copy of property documents are sent to bank's panel Lawyer for
legal opinion. Bank's appointed valuation agency does valuation of the property. Documents are also sent
to banks appointed title searcher. They provide report after verifying the documents in government's
different property related offices. All these are done before disbursement of the loan.
Cash Covered Loan
The general terms "Cash Secured Facilities is used to indicate two specific Retail Lending products.
These are: Secured Overdraft (SOD) & Secured Loan (SL) which are the major products of Retail
Lending Portfolio of the bank.
Secured Overdraft (SOD): Secured Overdraft is a revolving type of credit facility with a specific limit and a
tenor of maximum 1 year (renewable) & servicing of quarterly interest.
Secured Loan (SL): The credit facility, which is disbursed at a time, is being treated as Secured Loan.
This is a terminating facility & an EM based loan.
Allowable Securities: Acceptable securities are FDR General, Money Multiplier Scheme (MMS), Wage
Earner Development Bond (WEDB), Deposit Pension Scheme (DPS), Abiram, Freedom Fixed Deposit
(AFFD) & nterest First Fixed Deposit (FFD). Other Bank or Financial nstitution's securities are not
acceptable.
nterest Rate: nterest rate of SOD & SL should be at least 3% above on given security rate which is
subject to change by ALCO.
Minimum & Maximum facility Limit: Minimum BDT 50,000.00 and maximum is BDT 100 million.
b. Cards Credit

The main job of Cards Credit is to assess the applications & come to a decision whether to approve for
issuing of credit card or not. f everything provided document is ok of a particular application; credit then
fix a credit limit according to PPG of Credit Cards. The main sources of Credit Card application forms are
Direct Sales Team, Tele Sales unit, & Branches.
The minimum credit limit is BDT 10,000 & the maximum credit limit is BDT 500,000 and those are
underwritten by Head of Credit, Manager/Associate Manager of Cards Credit & Credit analysts as per the
delegation of authority. Credit limit fixation is at the sole discretion of the Credit Manager/Associate
Manager, analysts by following some pre-set guidelines of the bank. Cards' credit limit is assigned based
on the customer profile, bank solvency and income justification, i.e. GM & Net ncome. The main income
groups for applying a Credit Card are the govt. & semi-govt. employees, other salaried persons & the self-
employed persons. The credit limit for the BRAC Bank employee is set as per their net income reflected in
the pay slip. Also anyone can get credit card against the account lien for card particularly. This is called
as secured card. The age bar for applying credit card is 21 to 60 years for primary applicant & 18-60
years for supplementary applicant. There is no age bar applicable for applying a secured card.
Documents are the key considerable things for assessment. Documentations requirement varies for
different types of income group. For example for salaried applicant latest Salary Certificate/LO/Pay Slip
with all the deductions on official letterhead, latest Bank Statement, TN Certificate, valid Photo D is
mandatory. But for Self-Employed applicant Trade License copy with clearly stated owner's name,
previous Trade License copy is required to proof of 2 years business existence, Memorandum of
Association stating the ownership share for Public Limited Co., Partnership Deed for partnership
establishment, latest 1 year bank statement, TN Certificate are mandatory documents.
Contact Point Verification (CPV) is a must to approve a Credit card application. This job is done by the
Central Verification Unit of Credit Risk Management. All applications except joint Secretary/equivalent. &
Above, Colonel/ equivalent & above, Existing cardholder, Corporate customer, Cash Covered Card
applicant, Diplomats and corporate will go through the contact point verification prior to the approval of
credit card. Central Verification Unit does present & work addresses, phone numbers, the bank statement
(if required) and the Letter of ntroduction/Salary Certificate/Pay-Slip.
Another important job is done by Cards Credit is duplicate checking. This is done to stop issuing more
than one card for a particular applicant. To have the control existing credit card database is checked by
several criteria i.e. Name, DOB, Mother's Name, Contact no. etc.
c. Authorization & Fraud ControI Unit:

Authorization & Fraud Control Unit, Cards is functioning into three areas, Authorization; Transaction
Monitoring & Detection and nvestigation.
Authorization is a process of approval or refusal of a payment card transaction, limit issued in BDT, USD
or in dual currency according to customized amount desired by customer on different time and location.
The major activity of the unit is processing credit card cheque request from BBL branches and ROC's and
providing manual Authorization against specific code.
Transaction Monitoring and detection team usually make calls to all BBL credit card customer (ssuing
and acquiring) to verify (POS and non POS) transactions that fall under certain rules. As soon as a
suspicious transaction is noticed through live monitoring or internal reports, designated officer from
detection team contact the customer for authenticity of the transaction. f the customer disputed the
transaction/s, the card is blocked immediately by placing specific block code. The customer is also
requested to send disputed letter to Customer Service regarding the transaction/s.
nvestigation Unit performs to check credit card/loan applications after approval to prevent fraud attempts
on sample basis. At the same time, objective of nvestigation team is to investigate fraud cases relating
on situation basis to identify the actual facts and build control measures to prevent the similar fraud
attempts in future.
d. CentraI verification Unit(CVU)
n credit perspective, "verification" is the act of reviewing, inspecting, testing, etc. to establish and
document that information provided by a loan applicant are accurate. n other words verification is
A confirmation of truth or authority.
The evidence for such a confirmation.
A formal assertion of validity.

While extending credit for any purpose spot verification is inevitable for the analysis of credit worthiness
of borrower, which will eventually ensure proper lending.

n other word, Preparing verification report are the means of getting transparent, correct & reliable
physical existence of borrower's organization, residence, permanent address, bank statement accuracy,
TN certificate, Company profile, static data change, Trade license rent proof other relevant information
provided by borrower in the loan application.

Since BRAC bank has a huge customer base it felt the importance of verifying clients before disbursing
any loan. Therefore, the Central Verification Unit has been introduced as a separate wing under Credit
Risk Management Department on March 2007. The main purpose of this wing is to ensure contact point
verification.

CVU is committed is delivering a contact point verification (CPV) services and other pertinent task in
relevance to loan, credit card application from prospective customer's for services in consumer credit
division of the bank.

(3) SME Underwriting

SME Credit team is a unit under Credit Risk Management Division, manages the credit risk of the Bank's
SME credit portfolio. A typical SME borrower merely maintains regular banking transaction and often
found not having proper financial records. They often lack definite fund utilization plan. Low investment in
the business is very common in such enterprises. As such assessing creditworthiness of these borrowers
requires more than conventional credit risk management wisdom. Our bank being the pioneer in financing
such borrowers in a large volume is experiencing this phenomenon and developing the expertise by the
strategy may be named 'Learning by doing'.

Credit Analysts assess the proposal with due emphasis on Client's requirement and capacity. During
assessment the analysts fulfill a Risk Evaluation Sheet (which covers most PPG criteria) to ensure
compliance with Policy and PPG. dentifying key risks involved in the proposal is one of the most critical
and tricky tasks for the credit analysts; it requires experience of handling such clients directly to
understand the business modalities and more importantly behavioral issues viz. reputation, character etc.
Unlike Corporate, Retail and Cards (where all loan proposals require approval from Head office) SME
credit deals with approval of loan proposals of certain area at present. However Centralization of SME
loan approval is under process. At present 14 territories of SME businesses are covered by CRM. . They
are:
Dhaka Urban 1,2,3,4
Dhaka 1,2,3 and
Chittagong, Cox's Bazar, Jessore, Khulna, Kushtia, Gopalganj, Sylhet

n other Territories Zonal Managers / Associate Relationship Managers are authorized to approve the
loans from other territory (At present it is less than or equals to BDT 6 Lac). However Approval Authority
shall be restricted to CRM only across the country on phase by phase. t has been decided that SME
Credit shall run its operation from Nine CRM centers along with from Dhaka and Chittagong. They are:
Rangpur, Bogura, DEPEZ, Mymenshing, Sylhet, Comilla, Jessore and Barisal.

Credit Analysis is abide by the policies, and it's a must do for approving a SME proposals. Below are the
policy documents SME Credit is required to follow -
Prudential Regulation for Small Enterprise Financing
Credit Policy for Small Enterprise Financing
Product Program Guidelines (PPG)
Environmental Policy of the Bank
Other Bangladesh Banks Guidelines and Circulars issued from time to time

Generally, as a support division, SME Credit Team supports the SME Business Unit by ensuring
the quality of the Credit. Credit Analysts are the key working force for pulling down the above-
mentioned task and their responsibility is to
i). Assess Creditworthiness of a potential borrower
ii). Analyze requirement and capacity of the customer
iii). Ensure compliance with all internal & external (regulatory) Policy/PPG/Circulars related to
sanctioning of a credit facility,
iv). dentify Credit Risk & Mitigates associated with a loan proposal and
v). Recommend for Approval/ Rejection with appropriate terms and condition after through Credit
assessment.

After recommendation by the credit analysts the loan files are presented before appropriate authority for
approval. The approval authority is delegated to Officers of the Bank according to their experience in
related field. Managing Director delegates the approval authority to individual Officers in their name, not
to any position.
f a simple algorithm of the whole process can be written down it would be as follows
Step 1: CRO's located in the unit offices across the country prepares a loan proposal
Step 2: Respective Supervisor (ZM / ARM) Recommends the loan proposal and sent to SME Credit
Step 3: Credit Analysts analyzes the loan proposal and place it before approver
Step 4: Credit Approver Approves / Declines the loan proposal based on the recommendation
Step 5: File sent to disbursement unit for disbursement
Loan proposal assessment being the principal function, SME Credit team also contributes to
O Providing Policy nput
O Offsite monitoring of SME Portfolio to some extent
O Staff development by training
O Creation of awareness among the related employees by issuing circular, etc.
O
About 50% of Bank's portfolio is concentrated to SME sector. Performance of this portfolio has immense
impact on Bank's overall performance. With the increased responsibility of SME Credit team its role has
become very critical to Bank's future growth and long-term sustainability along with keeping the promises
to its different stakeholders.

(4) Credit CoIIection Unit
Main ResponsibiIities of CoIIections

The collection process for SME and Retail starts when the customer failed to make one or more
contractual payment (installment). t therefore becomes the duty of the collection department to minimize
the outstanding delinquent receivable and credit losses.
The collection staff has to systematically recover the dues and identify \ prevents potential losses while
maintaining a high standard of service and retaining good relations with the customer.
Collection plays a key part in the credit process and in ensuring the profitability of asset products and
quality of the portfolio by collecting the delinquent receivables efficiently and effective. The main objective
of collection is to ensure that, wherever possible, an account that is in arrears is brought up to date and
the customer's goodwill is retained.
The objective of this department operations instruction is to standardize and streamline the procedures in
collection and to archive a good understanding of a collector's scope of responsibilities.

Key Concepts:
Key concepts to be identified to understand what collection departments are doing:
DPD : Days Past Due, counting from the following date of nstallment due date.
ATE : Arrear Time Equivalent, it also relates on payment due date and aliened with DPD.
PAR : Portfolio at Risk, when a loan account became delinquent for more that 30 days we can identify
that
account to be included as a risky account among the portfolio.

Systems used
CARMA (Collections & Recovery
Management Applications)
Using Clients general Enquiry, maintaining collection MS, productivity
judgment analysis of collectors.
FNACLE/ CARMA For enquiry the transactional accounts and customer details.
XCRV For enquiry the transactional accounts and customer details.(Parallel
software like FNACLE/ CARMA )
CCS ( Central Collection System ) Used for clients general enquires input of collection call summary,
productivity, effectiveness against set target.
Card Pro For enquiry the transactional of Credit Card and customer details. input of
collection call summery, productivity, effectiveness against set target.
Ms office, Excel, word, access,
power point
For generation of various MS, regulatory returns, Customer letter tracking,
Collections Executive's performance tracking portfolio Download, various
correspondences. Etc.
CCURLGS For generate all type delinquent letters
Lotus notes For communications.
TEAM 2 Compliance Risk Management.
Telephone, fax For communication and collection call

Services Offered
Fund transfer for account regularization.
Reschedulement & DRP for impaired delinquent loans.
Full & final settlement of loans.
Required arrangement for change in payment date etc.
Closure of all consumer asset portfolios.
Main Guest.
Guest(Clients)
Credit Risk Management, Special Asset Management.
Consumer service delivery specially SBS, RBS, Loan Originations, CVU and Branches
Outsourced Agencies.
Legal Agencies.
CoIIection processes
Customers are provided with an Offer Letter or Banking Arrangement letter during Loan disbursement
where the total payment mood and loan details are described. When a customer fails to fulfill the agreed
terms or misses the required payment, the account then enters collections. Collection department is
responsible for collecting the overdue amount from the delinquent customers. There are different stages
involved in collection after an account enters delinquency till regularization of the account by recovering
the overdue. The aging of an account in collections is with reference to the days since missed payment.

BasicaIIy coIIection can be broadIy divided into four stages:
Servicing
Locating
Collecting
Cancellation and write off

DeIinquency Category, CIassifications and Account Aging:
Monthly Account Monitoring reports for SME are prepared for the use of the Collections at the beginning
of every month based on preceding month's data. However, daily report is also generated from FNACLE/
CARMA as and when required. The level of delinquencies are determined based on the number days
past of monthly installment from 1st payment date by the customer, following are basis of bucket
calculation as guided in the DPD.

Arrears
Ration
Bucke
t
ParticuIars DPD
Reporting
as
0 to 0.99 0 Regular Customer 0 DPD Regular
1 to 1.99 1 The sum past due is equivalent to one
month's payment
X DPD(0-29) Delinquent
2 to 2.99 2 The sum past due is equivalent to two
month's payment
30 DPD(30-59) Delinquent
3 to 3.99 3 The sum past due is equivalent to three
month's payment
60 DPD(60-89) Delinquent
4 to 4.99 4 The sum past due is equivalent to four
month's payment. nterest to be
suspended at this point.
90 DPD(90-119) Delinquent
5 to 5.99 5 The sum past due is equivalent to five
month's payment
120 DPD (120-149) Delinquent
6 to 6.99 6 The sum past due is equivalent to six
month's payment. 50% charge off at this
point.
150 DPD (150-179) Delinquent
Cards CoIIection Unit
The collection process of credit cards starts when the cardholder failed to meet one or more contractual
payment (i.e. minimum 5 % of the outstanding payment) or exceeds the allocated credit limit or both. t
therefore becomes the duty of the Collection Unit to minimize the outstanding delinquent receivable and
credit losses.

DPD wise aging for Credit Card and status:
No. of days
Past due
Code DeIinquency and Status
X DPD (0-29) Age-1 Delinquent
Open/Temporary Block
30 DPD (30-59) Age-2 Delinquent
Temporary Block
60 DPD (60-89) Age-3 Delinquent
Temporary Block
90 DPD (90-119) Age-4 Delinquent / Permanent Block / nterest Suspended
120 DPD (120-149) Age-5 Delinquent / Permanent Block / nterest Suspended
150 DPD (150-179) Age-6 Delinquent / 100% Charge Off
180 DPD (180+) Age-7 Delinquent / 100% Charge Off

VitaI 5 of CoIIection:
Verify nformation: Verifying-
Mailing address
Cell Number
Land phone number
Other contact numbers- relatives, wife etc.

Obtain Reasons for DeIinquency: dentifying-
Why is the account past dues?
What is the guest's financial situation?
Are the guests and / or spouse working?
Explain benefits of paying / Consequences:
Avoiding late payment fee
Avoiding restriction for limit enhancement( repeat loan).
Avoid being a highly delinquent customer and a restricted person for other financial institutions.
Avoid any negative report to Credit nformation Bureau (CB).
Avoid involvement of collection agent for recovery of loan.
Avoid legal actions under the Law of the Land.
Get Kept Promise: While negotiating with the customer getting a valid promise to be ensured by getting
the answer of following questions:
How much? - The amount he is promising to pay
When? - A specific date of payment.
How? - By cash, telegraphic transfer, cheque, A/c debit instruction.
Where? - At which branch or ATM?
Source? -ncome, commission, cash in hand, borrowing, loan, selling a possession etc.

Account Documentation: Note down the summary of the conversation made with the customer and
details of additional information's gathered to systems used for collection purpose.

AIIocation of DeIinquent Account:
From collection perspective, delinquent accounts are treated in four (04) categories as follows:
Front-End: X & 30 DPD (1-59 DPD)
Mid-Range: 60 & 90 DPD (60-119 DPD)
Hard-core: 120 & 150 DPD (120-179 DPD)

Treatments for CoIIections:
Physical Visitation
FD Tracking & Monitoring
Skip Tracing
Dunning Letter
Return letter
Settlement (Need to discuss with HOC)
Tenor enhancement
Remedial Management
Litigation
Partial waiver of charges in one go settlement.

(5) SPECIAL ASSETS MANAGEMENT-SME & RETAIL

Special Assets Management-SME & Retail Banking is a special department under CRM. ts vital role is to
recover the bank's bad portfolio. SAM deals with Bank's non-performing loans through legal
persuasion/procedure and facilitates external and internal recovery forces to maintain Bank's portfolio at
risk (PAR) at a steady position. Presently SAM has more focused on its expansion as day by day this is
becoming more challenging for managing the huge NPLs.
SAM department established the finest structure in the Banking industry of the country. Based on priority,
SAM is designed mainly as SME unit and Retail unit and also two separate units for Legal support & MS
and a Monitoring unit which acts as internal audit of the both portfolio.
For better performance and case to case close monitoring, it has segregated SAM-SME unit into four
separate Regions i.e Central, South, North and East. At the same time, SAM-Retail unit has divided into
two separate wings i.e Retail-Recovery and Retail-Legal. SAM-Retail-Recovery wing is a combination of
in-house recovery team and 3
rd
party recovery agencies.
SAM Structure:
a) SAM-SME (Central, South, North, East)
b) SAM-Retail (Recover, Legal)
c) SAM-Legal Support & MS
d) SAM-Monitoring

We have an excellent external and internal team encompasses of our Recovery Executives, Officers,
Managers and Lawyers working together across the country. We have an expedient Policy and
Processes which works as a guideline and recommendation to control classification and provision
expenses of the Bank.
SAM Activities:
The basic activity of SAM is RECOVERY of SME and Retail impaired loans through
1. recovery channel
2. cost effective legal procedures
3. amicable settlement
4. execution of decrees
5. repossession of car
6. arrangement of auction to sell the mortgaged property; collateral security
7. external 3rd party agencies
8. write-off management
9. waiver process

t is not the department to solicit/facilitate all legal services to every department. SAM department deals
with the legal actions regarding mitigation of bad portfolio under SME & Retail Banking Division.
FiIe Transfer:
Files transfer to SAM from SME when the loan reaches at DPD 180. SAM receives the file from Retail
when the loan reaches at DPD 360.
LegaI Action:
SAM processes the following types of cases:
a) Negotiable nstrument Act-1881, under section 138
b) Artha Rin Adalat Ain-2003
c) Civil Procedure code-1908
d) Penal Code-420/406/109
e) Appeal/Review/Revision
f) Writ Petition
g) Legal proceedings filed against BBL Staff in relation to recovery of loans.

Lawyer recruitment:
Generally 2 (two) lawyers would be enlisted in each district. f the cheques are
destroyed/damaged/utilized case to be filed in Artho Rin Adalat Ain-2003. f the loans are non-collateral,
SAM files cases under section 138 of N Act-1881. f the cheque is dishonored/returned for insufficient
fund. SAM files cases under N Act-1881, section 138
LegaI Notice:
Legal notice issued to SME at DPD 145 and for Retail at DPD 360, SAM-S&R would arrange to serve 1st
legal notice for warning the default borrower to adjust the total outstanding and 2nd legal notice would be
served after bouncing the cheque or before litigation under Artha Rin Adalat Ain 2003. 1
st
legal notice
served centrally across the country and 3
rd
party recovery agencies are working with retail defaulters. 15
(fifteen) days in 1
st
legal notice and 30 (thirty) days in 2
nd
legal notice under N Act given to the defaulter
to adjust the total outstanding.
Legal name of cheque dishonored case is case under Section 138 of Negotiable nstrument (N) Act-
1881.
Artha Rin Adalat Ain-2003 is a civil nature law. SAM filed case for recovery of loan against a deceased
borrower under Artho Rin Adalat Ain-2003.The legal successor/s of a deceased borrower, the third party
guarantor/s (if any) and the third party mortgagor/s (if any) will be the necessary opposite parties in an
Artha Rin case against recovery of loan of a deceased borrower. The principal debtors, the third party
guarantor/s (if any), and the third party mortgagor/s (if any) will be the necessary opposite parties in an
Artha Rin case. f the decree holder wants to execute any judgment of Artha Rin Adalat, he/she should
file an execution suit (Artha Jari) within 1 (one) year of expiry of stipulated time. Bank files cases to
recover their claim under Artha Rin Adalat Ain 2003. SAM will offer Auction to recover the overdue loan
against mortgaged properties before filing the case under section 12 of Artha Rin Adalat Ain 2003.

SAM file case under Penal Code-420/406/109 for committing criminal breach of trust, unauthorized sale
of mortgaged property or assets created out of bank loan, fake loans, closing of a/c where from security
cheques are provided etc. SAM has to obtain special recommendation from the respective Unit Heads if
they want to file a criminal case under section 420/406/109 of Penal Code.
Write- off Management:
BRAC Bank has a specific Write-off policy developed based on BB circulars. SAM takes initiative to write-
off bad portfolios as per policy if following criteria satisfied,
a) Classification status will be BL
b) 100% provided
c) Litigated (under any kind of Law of the land)



Waiver process:
SAM with its country wide recovery structure takes initiative to settle bad loans amicably by giving
delinquent customer waiver facility. The waiver amount will be fixed on judgmental basis i.e. affected by
sidre, natural calamities, demise, business closed etc. however, in any cases; waiver of principal portion
is not awarded.
Case Withdraw:
SAM withdraw the case when a litigated defaulter adjusts outstanding amount in full with updated interest,
legal costs and other expenses if any, and/or upon amicable settlement SAM withdraws the case against
such defaulters on receipt of clearance certificate from Operations.
ExternaI 3rd party agency Management:
SAM hands over the files to 3rd party recovery agency after one month of issuance of 1st legal notice.
Only the retail loan files, which are delinquent (if minimum 30% of outstanding is not recovered within 30
days after 1st legal notice) are handed over to outsource. SAM takeover the files from 3
rd
party recovery
agency after 90 days.
(6) SpeciaI Asset Management & Credit Inspection, WhoIesaIe Banking
& Medium Business (SAM & CI, WB & MB):
The department is split up from the Corporate CRM to maintain and ensure appropriate recovery
strategies are implemented as per policy guideline.
The department functions under three major areas which are as follows:
(1) Credit nspection through File and Field level area
(2) Early Alert Account
(3) Legal Procedure

1. Credit Inspection:
Credit nspection through file and field level area deals with all matters relating to credit inspection,
ensuring compliance of BBL policy towards credit granting process, corporate portfolio review and
physical inspection of client's premise and files, including security documents, for providing management
information reports on a regular and ad hoc basis.
Working area of Credit Inspection:
Following activities are fulfilled by credit inspection team.
nspect document file preserved with Origination Department.
nspect document file preserved with Wholesale Credit.
nspect document file preserved with Corporate Banking Department.
File inspection report generation.
Report vetting with concerned department for minimizing error level.
Final report published for modifying findings.
Summary report generation of file inspection.
Summary report publishing for modification.
Update the relevant modification.
Customer's office, factory, store visit.
Stock verification.
Visit report generation and publishing.
Prepare and maintain SAM & C related database.
Prepare meeting minutes for SAM & C meeting.
Meeting arrangement for reschedule, interest waiver.
Recovery of NPL.
Response of BB queries.
Corporate & Medium Business loan file documents review.
Corporate Classified Loan dentification.
Corporate Loan Regularizing & Recovery.
Call report & visit report preparation.

2. EarIy AIert Account (EAA):
Early Alert Process is an effective tool & technique that will help us in detecting any deterioration in
corporate and medium enterprise clients account and trigger out problem accounts at an early stage so
that proper attention can be given to avoid any losses. An Early Alert Report (EAR) is developed by
respective RM and sent to CRM within 07 days for identification of weakness and other discrepancy.
Reporting of EarIy AIert Account:
Despite a prudent credit approval process, loans may still become troubled. Therefore, it is essential that
early identification and prompt reporting of deteriorating credit signals be done to ensure swift action to
protect Bank's interest. The EAA symptoms are identified on the basis of 6 (six) typical characteristics of
the client which are ndustry & Competition, Ownership & Management, Balance Sheet, Cash Flow/
Repayment sources, Performance and Expired Limit/ncomplete documents. rrespective of the credit
score obtained by any obligor as per the proposed risk grade score sheet, the grading of the account
highlighted as Early Warning Signals (EWS) account.
On the basis of market information/ industry position or other subjective issues which has some strong
ground, CRM may recommend transferring the status of a regular account to EAA status.
The CRM should submit a consolidated EAR to the Credit Committee.
Redemption of EAA:
An account may be declassified to a regular account from the EAA status when the symptoms, causing
the EA classification have been regularized or no longer exist. The concurrence of the Credit Committee
is required for conversion from Early Alert Account status to regular account status.
3. LegaI Procedure:
SAM & C deals with managing impaired assets, Non-Performing Loan and the associated legal aspects.
Account Transfer Procedure:
When an account is being downgraded to SS and below, a Request for Action (RFA) along with a
checklist should be completed by RM with the help of CRM division and forwarded to Head of Special
Asset Management & Credit nspection (HOSAM&C) for acknowledgement.


Non Performing Loans: ReaIity and ChaIIenges
Nonperforming loans ("NPLs) refer to those financial assets from which banks no longer receive interest
and/or installment payments as scheduled. They are known as non-performing because the loan ceases
to "perform or generate income for the bank.
NPLs can be classified into different varieties usually based on the "length of overdue of the said loans.
NPLs are viewed as a typical byproduct of financial crisis: they are not a main product of the lending
function but rather an accidental occurrence of the lending process, one that has enormous potential to
deepen the severity and duration of financial crisis and to complicate macroeconomic management. This
is because NPLs can bring down investors' confidence in the banking system, piling up unproductive
economic resources even though depreciations are taken care of, and impeding the resource allocation
process.
According to the qualitative judgment criteria, bank managers classify any loan if it forecasts the
uncertainty of recovery of the loan due to the following reasons:
O Credit extended without approval of competent authority or without any logical basis (under
pressure).
O ncomplete documentation.
O nsufficient security or drastic fall in the value of security.
O Borrower sustains heavy loss in capital due to natural calamity or business condition.
O Frequent overdraw of limit
O Rescheduling terms are not maintained.
O Borrower cannot be traced or death of the borrower.
O Filing a suit against the borrower for recovery of credit.

NPL Account Monitoring:
As the account is handed over to SAM & C, WB & MB, the account is assigned to an account manager
within SAM, who will review all documentation, meet the customer with RM and prepare a Classified Loan
Review (CLR) report. The CLR should be approved by the Chief Credit Officer and copied to the Head of
Corporate Banking. The initial CLR should highlight any documentation issues, loan structuring
weakness, proposed workout strategy and seek approval for any loan loss provisions that are necessary.
Step Overdue
Period
Action Plan nitiative taken
Department / Division
0 days For each corporate customers, letter to be generated to inform
about expiry of the existing limit, at least two months ahead of
the expiry date and due date for installment
Corporate Banking
Division
1 1 to 30
days
Pursue over telephone for adjustment/payment of overdue
installment / interest and make a diary note.
ssue letter-informing about account fallen overdue and
request for regularization
Corporate Banking
Division
2 31 to 45
days
Persuasion over telephone to be continued
ssue 1
st
reminder
Corporate Banking
Division
3 46 to 59
days
ssue 2
nd
reminder for adjustment
Visit customer and submit a visit report
Check security documents
Corporate Banking
Division
Wholesale Banking
Operation
4 60 to 89
days
ssue 3
rd
reminder for adjustment
Report as EAA by Corporate/CRM
Call report
Corporate Banking
Division
Corporate CRM
SAM & C, WB & MB
5 90 to
179
days
Treat as SMA
Charge interest into Suspense
ssue notice to the borrower at least one month ahead of
classification stating that the account is going to be classified
Final reminder demanding payments and informing of the
consequences i.e. warning of legal action in case of default.
Corporate Banking
Division
6 180 to
269
days
Borrower to be transferred to SAM & C through prescribed
format with proper justification
Letter to Guarantor referring to above efforts seeking their
cooperation/asking for adjustments
Corporate Banking
Division

SAM & C, WB & MB
7 270 to
329
days
Review all documents (internally/Externally)
Meet the customer
Classified Loan Review Report
SAM & C, WB & MB
8 330 to
420
days
Meet the customer
Site visit
Strategy preparation for reschedule/exist/case filling under N
Act and Artha RN
Circulate the defaulter names to different Banks/NBF
SAM & C, WB & MB

LegaI Procedure:
Process flow for case filing under:
NI Act 1881
1 Within 15 days after 420 days Cheque Bounce SAM & C, WB & MB
2 Within 30 days of the cheque return days Serve legal notice SAM & C, WB & MB
3 Within 30 days of the acceptance of legal
notice
Case filing SAM & C, WB & MB

Artha Rin AdaIat Ain 2003
1 Within 30 days after 420 days Serve legal notice SAM & C, WB & MB
2 Within 45 days of notice period expiry Auction notice to be published
in the News Paper
SAM & C, WB & MB
3 Within 60 days of the expiry of auction
period
Case filing SAM & C, WB & MB

Activities of SAM & CI in case of LegaI procedure:
Following activities are done by the department.
a. Filling case under N Act 1881 & Artha Rin Adalat Ain 2003.
b. Court attendance.
c. Persuasion for transferring case from CMM to District Judge.
/. Executing arrest of warrant.
e. Communicating with local police station & pursuing for execution of arrest warrant.
f. Communicating with lawyer & discussing about every sections of the case.
g. Visiting & finding out default clients actual business & resident address for those clients who are
not communicating with the bank.
h. Checking & verifying lawyer bill submission.
i. Maintaining case register.
j. Corporate MS case maintaining.