Analysis of Loan Disbursement and Recovery Status

OBJECTIVES OF THE REPORT:

To provide a thorough understanding of the Credit Risk Management Practice followed by Shiddirgonj Branch of BANGLADESH KRISHI BANK for credits. The report attempts to show whether the Credit Risk Management Practice followed by BKB is in compliance with Bangladesh Bank guidelines. Some core issues like Classification procedures and Non-performing Loan handling procedures will also be discussed thoroughly. Credit Risk grading procedure proposed by Bangladesh Bank has also been intended to be scrutinized in the report with the existing risk rating system followed by BANGLADESH KRISHI BANK.

So I can categorize my study objectives in two types. They are-

1. Broad objectives.
2. Specific objectives.

These are objectives of the study are described as follows:

Broad Objective:

• The broad objective of the report is to have an overview on Loan Disbursement & Recovery Status by BKB.

 Specific Objectives:

• To develop knowledge about Loan Disbursement & Recovery in BKB.
• To identify the strengths and weaknesses of the loan approval and monitoring process in BKB.
• To make recommendations regarding the Bank’s loan activities.
• To understand the loan disbursement and recovery the bank follows in the competitive market.
• To provide brief description about different operations areas of   Bangladesh Krishi Bank Limited.
• Prudential Guidelines on Loan Disbursement & Recovery issued by Bangladesh Bank.

METHODOLOGY:

  SOURCES OF DATA

To complete my internship report I have used information collected from two sources .They are-

1. Primary sources.
2. Secondary sources.

  Primary sources: Primary sources of the information are the information

Collected by the practical office desk work, direct conversations with the employees of the bank, direct observations of the functions, relevant document studies provided by the concerned officers.

Secondary sources:  Majority of the information were collected from the secondary sources, which include books, publications, reading materials and various circulars and reporters, published by Bangladesh Krishi Bank. I have also collected information from various websites. For the analysis part I have collected data from the loan proposal and from other documents.

      DATA ANALYSIS   

This is a descriptive report mainly aiming to depict the loan approval process and monitoring techniques of BKB. The data gathered from both primary and secondary sources were arranged orderly to get a clear picture of the BKB’s loan management regarding lending process and monitoring. The study includes both qualitative and quantitative analysis of loan approval process and monitoring tools. Based on the observational information I have also tried to evaluate and analyze the problems involved in various phases of the loan disbursement & recovery status.

  Presentation of Results and Recommendations

After the data analysis, recommendations are made based on the critical evaluation of the different phases of process and techniques involved in loan approval and monitoring.

 LIMITATIONS:

There are some limitations of the study. These limitations are mentioned below:

• Bank is a sophisticate business sector. So bank do not interested to provide me confidential data.

• Time is one of the important limitations of this report.
• Sometimes collection of primary data is not easy enough or time consuming.
• Another limitation of this report is Bank’s policy of not disclosing some data and information for obvious reason, which could have been very much useful.
• Sometimes employees were very busy to give their valuable time.
•  Lack of experience of making internship report is one of the limitations of my study.
• Sufficient records & publications as well as up to date information are not readily available.

 SCOPE OF THE STUDY:

The scope of the organizational part covers the organizational structure, background & objectives, functional experimentation & business performance of “Bangladesh Krishi Bank (BKB)” as whole and the main part covers operational scenario of “Bangladesh Krishi Bank”. It focuses on loans and recovery status of Bangladesh Krishi Bank.

TIME SCHEDULE:

For completing the report the time schedule was as follows:

ORGANIZATIONAL PROFILE

Bangladesh Krishi Bank is 100% govt. owned specialized bank in Bangladesh. KRISHI means agriculture in Bangladesh. Since its inception Bangladesh Krishi Bank (BKB) is financing in the agricultural sector remarkably. BKB also performs commercial banking. People work abroad can easily send home through our “TAKA DRAWING” arrangement. The major occupation of Bangladeshi people is KRISHI which means agriculture. About 85% of our people depend on the agriculture which contributes a significant portion to our GDP. And BKB is working to improve agricultural sector of the Bangladesh.

Bangladesh Krishi Bank has been established as a full Government owned bank under Presidential Order 27 of 1973. BKB is a Financing company under Banking Company Act-1991. Now it has 948 branches all over Bangladesh. Objectives of BKB is to provide credit facilities to the farmer for the development of agriculture and entrepreneurs engaged in development of agro-based as well as Cottage industries. The bank is guided in accordance with the policies and principles of the Government of the Peoples Republic of Bangladesh. In providing loan bank always give priority to the poor farmers and SME loans for the small entrepreneurs. It is somewhat different in some respects of risks because the loan risk is higher in this bank. And it also takes an essential part in the national development process.

 PRINCIPLE ACTIVITIES:

The bank provides all kinds of commercial banking services to its customers through its branches in Bangladesh. Generally it provides loan to individuals and corporate bodies related to:

• Production of Crops.
• Purchase of Irrigation Machinery and Equipment
• Development of Horticulture
• Pisciculture and finally
• Animal Husbandry.

The bank gives emphasis to establish small agro-based cottage industries at both urban and rural areas by way providing technical and financial supports. The Bank, within its constitutions put priority as far as possible and extend loan to small and marginal farmers. The bank as such is discharging its duty to the society side by side its responsibility as a financial institution.

 BKB AT A GLANCE:  

Name                                              :       Bangladesh Krishi Bank (BKB).

Status                                             :      Specialized Bank

Established                                    :     1973 (President’s order 27 of 1973)

Starts of Commercial Banking   :       1977

Authorized Capital                      :       15000000000

Paid up Capital                             :        9000000000

Reserve                                          :       2059927847

No. of Branches                            :         952

No. of Employees                         :         10272

EMAIL                                         :        bkb@citechco.net

WEBSITE                                    :       www.krishibank.org.bd

CHAIRMAN                               :      Khandakar Ibrahim Khaled

Although manpower needed in BKB is 13680 but there is lack of manpower more than three thousand.

 OBJECTIVES OF BKB:

Bangladesh is mainly an agricultural country. The infrastructures of the country are mainly based on agriculture. More than 60% of our labor force is related with agriculture or agriculture based industries. As its name suggest, Bangladesh Krishi Bank is mainly established for the development of the agricultural sector. If it can be possible to make the agricultural sector of a country as one of the profitable sector than it would also be possible to reduce the poverty level of Bangladesh. So the main objective of BKB is to make the agricultural sector as one of the profitable sector of the country. And to increase the standard of the living of the people. Agriculture is one of the most uncertain and risky sector to finance. But BKB is financing in the agricultural sector. The main objectives of BKB are as follows:

• Development of the agricultural sector and the agricultural based activities of the country.
• Help to make the agro-based product marketable.
• To strengthen the rural economy.
• To ensure proper economical development of Agro-based industries and small entrepreneurs by providing loans.
• To select the new sectors of agro-based products and take initiatives to develop the sector by providing loans and marketing support.
• BKB provides financial support to the entrepreneurs of the products which have enough probability to export.
• Financing the marginal farmers is one of the important objectives of BKB.

These are the prime objectives of Bangladesh Krishi Bank. Besides BKB also provides financial help to the poor farmers after every calamity to cope up with the situation.

 FEATURES OF BKB:

► BKB has an authorized capital of tk. 15000 Million only and paid up capital tk. 9000 Million only which is fully paid by the government.

► Bank has started commercial functioning since 1977.

► The bank operates its function through 952 branches (Rajshahi Division) of which 822 (86%) rural and 130 (14%) are Urban.

► It has 14 Foreign exchange (Authorized Dealer) branches.

► In the field level the bank has 8 divisional and 51 regional offices for close supervision of the branch activities.

► For smooth working bank has also 56 field level audit offices at divisional and regional levels.

► Among the 952 branches 212 branches have already been computerized.

 PERFORMANCE OF BKB:

As on 30th June, 2011 total assets (including contingencies) went up to Taka 140815 million from Taka 117823 million of 2010. During the same period operating profit has increased to Taka 3304 million from Taka 1787 million of 2010.

REND OF BRANCH EXPANSION:

 DEPOSITS:

Deposit is the largest source of bank funds. It is assumed that a medium size bank collects 85%-90% of its bank fund through deposits. To strengthen the base of the bank’s fund BKB emphasizes of collecting deposits. There are mainly four types of deposits. They are given below:

1. Fixed deposits.
2. Savings deposits.
3. Current deposits.
4. Short Notice Deposit (SND)

The year wise deposit mixes are given below:

The graphical presentations of the deposits of BKB for the three years are given below;

Deposit mix is the combination of various types of deposits of Bangladesh Krishi Bank. These deposits are consists of Fixed, Savings, Current deposits and others type of deposits. For the year 2011 the DEPOSIT MIX of BKB, Fixed are 48% of the total, Savings are 29%, Current deposits are 7% and others are 16% of the total deposit. This can be graphically shown as follows

 PROFIT AND OPERATING RESULT:

The Bank earned as operating profit Tk. 3304,001,494tk during 2011.And the amount of provisions for the year is 125,215,275tk Provision for income tax .Provision for tax  was nil for the year. There was no profit no loss situation and in the previous year net loss was (1,966,375,453). So the performance of the bank is better than the previous year.

 LOAN AND ADVANCES:

Bangladesh Krishi Bank is following the “PONCHO BARSHIKI NITIMALA” of the government from the year 2007-08.And working for the establishment of these planning.  BKB has provided 4003.20 cores Taka as loan and advance in the year 2011. And in the year 2010 it was 3441.56 cores. Which are approximately 561.64 cores more than the previous year. The lion portions of the loans provided by BKB are provided to the agricultural sector and in the agro-based industry. And which is also an indicator of banks dedication towards the development of the agricultural sector of the country.

 INVESTMENT

BKB also does the work of investments. Investment is one of the major sources of the uses of fund. BKB mainly invests on various Bonds, Debentures and shares. In the year 2011 the total amount invested by BKB was 1,511,989,500 Taka. Of which Share was 34,439,000 Taka and Bond was 1,477,550,500 and in the previous year it was about 1,491,694,500 taka.

EXPORT BUSINESS

The total quantum of Export business handled by the Bank in 2011 stood at Tk.1346.70 core Taka as compared to the volume of Tk.1084.45 in 2010 registering an increase of 262.25 cores Taka.

 IMPORT BUSINESS

Import business handled by the Bank during the year 2011 amounted to Tk. 2297.94 core Taka as against Tk.1813.00 core Taka of the preceding year registering an increase of 484.94 cores Taka.

REMITTANCE

There are two types of remittances, one is the inward remittance and another one is the outward remittances. In the year 2010 total inward remittances were 687.78 cores but in the year 2011 it is 951.27 cores. Which were 263.49 cores higher than the previous year. And the outward remittance was 9.46 in 2010 and in 2011 it is 17.21.

 MODERNIZATION OF THE BRANCHES

To ensure quality of services to the customers BKB is computerizing its branches. At present regional office, Head office and other Divisional Branches are computerized. In 2010-11 fiscal years there 162 branches have been computerized. And to ensure quality and quick service there has been opened one stop services in this branches. Providing online Banking service is under processing in some important branches.

 AUDITORS OF THE BANK

The Audit Firms M/s. Zoha Zaman Kabir Rashid & Co and Kazi Zahir & co. jointly has done audit and Inspection of the Books of Accounts of the Bank for the accounting year ended 30^th June 2011 jointly.

 CORPORATE GOVERNANCE & REGULATORY COMPLIANCE

Eastern Bank Limited practiced the principles of good corporate governance over the years that covered compliance of regulatory requirements, responsive to various stakeholders. Spirit of corporate governance also included practicing of the corporate culture within the organization and shared this by the employees.

Eastern Bank Limited complied with all the regulatory guidelines prescribed by the Banking Companies Act, Bangladesh Bank, National Board of Revenue and Securities & Exchange Commission, International Accounting Standards, etc.

BRANCH INFORMATION:

I got chance to work as an internee in the Shiddirgonj Branch of Bangladesh Krishi Bank. The bank is located at Chittagong Highway Road, Shiddirgonj, and Narayangonj. There I obtained practical knowledge of working at various departments.

(Amounts are in Taka)

SWOT ANALYSIS

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

Strengths:

• Bangladesh Krishi Bank has already established a favorable reputation amongst the people in the banking industry of the country. It is one of the leading specialized banks in Bangladesh.

• Bangladesh Krishi Bank has provided its banking service with a top leadership and management position.
• Bangladesh Krishi Bank has gained enough confidence of the poorer section of the country. They feel quite comfortable to make any transaction with the bank as it is fully Government owned specialized bank.

• Bangladesh Krishi BANK has an interactive corporate culture. The working environment is very friendly, interactive and informal. And, there are no hidden barriers or boundaries while communicate between the superior and the employees. This corporate culture provides as a great motivation factor among the employees.

• Bangladesh Krishi Bank has 952 branches across the whole country. This is considered as one of the strengths of BKB.
• Bangladesh Krishi Bank has some definite objectives. So it can conduct its activities towards its objectives.
• BKB is fully a government company. BKB is financially strong as result customers feel comfortable in dealing with the company.
• BKB’s lending rate is lower than any other private commercial banks.

Weaknesses:

• Bangladesh Krishi Bank has less manpower than needed. BKB has 10272 employees. But manpower needed 13680.
• The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.
• The poor service quality has become a major problem for the bank. The quality of the service at BKB is lower than the other private commercial banks.
• Profit making is not the prime objective of BKB. So in some sector of BKB there is no or slow growth.

• In terms of promotional sector, BKB has to more emphasize on that. They have to follow aggressive marketing campaign.
• The bank is not fully computerized so the banking procedure is time consuming.
• BKB can not provide enough customer satisfaction.

As previously mentioned, the world is advancing e-technology very rapidly. Though Bank Asia has taken effort to join the stream of information technology, it is not possible to complete the mission due to poor technology and infrastructure of our country.

Opportunities:

In order to reduce the business risk, BKB has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.

• BKB can improve the quality of service by introducing automation and online banking.

• Opportunity in retail banking lies in the fact that the country’s increased   population is gradually learning to adopt consumer finance. The bulk of our population is lower class and middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.

• A large number of private banks coming into the market in the recent time. In this competitive environment BKB must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.
• BKB can use the customer confidence and expand its activities towards the development of the country by providing quality services and customer satisfaction.
• BKB have to identify the emerging agricultural sector and finance the sector to make the sector more profitable.
• If BKB can be able to establish agricultural sector as one of the profitable sector than people will get interest more in agricultural sector and agro based industries. Thus the rural poverty can be eradicated.

Threats:

• BKB performs commercial banking activities. So all sustaining multinational banks and upcoming foreign and private banks pose significant threats to BKB Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against these local and foreign banks.

• If BKB can not provide sufficient help and support to the poorer section and the marginal farmers than the development of agricultural will not be possible.

• BKB is financing in the development of agricultural sector of the country. And we all know that Agricultural sector is one of the most uncertain and risky sector to invest. These uncertainties are considered as one of the major threats for BKB.  

LOAN MANAGEMENT:

Loan management is the process for controlling and collecting payments from your customers. A good loan management system will help you reduce the amount of capital tide up with debtors (people who owe you money) and minimize your exposure to bad debts.

Good loan management is vital to cash flow. It is possible to be profitable on paper and but lack the cash to continue operating in business.

 LOAN MANAGEMENT POLICY:

Loan management policies help the loan department operate more efficiently. Loan management policies are rural & guidelines established by top management that govern the company’s loan department and its performance in the extension of loan privileges. Loan procedures are employed to achieve the goals of loan management policies.

 TYPES OF LOAN MANAGEMENT:

Loan management policies allow the loan department to operate more efficiently. Ambiguity is reduced over how to proceed when policies are clearly-defined. Loan management policies can offer specifies rules in regard to the loan amounts, type of customers, debt-to-income ratio, collateral requirement, payment terms and interest rates.

Types:

There are several types of loan management policies. They are based on the industry, lending activities and top management’s business style or approach to lending. Automotive, academic, home, retail, wholesale and credit card lending all may have different loan management policies. A tight loan management policy to conservative and restrictive guidelines for the extension of credit. A loose policy allows for more flexibility and may focus more on simply making sure debt is repaid instead of credit analysis and review.

Procedures:

Loan procedures are the specific ways in which top management requires the loan department to achieve loan management policies. They can include instructions on what data is to be used for the loan investigation and analysis process and other procedures. Loan procedures can also provide information for the loan approval process, account suspension and instances requiring management notification.

Cash Flow:

A major influence on loan management policies is cash flow. Cash flow requirements describe the amount of money a business needs to meet its financial obligations or pay its bills. A loose loan policy in which little customer loan investigation is performed can lead to higher default rates and slower repayment of debt. This can have a significant impact on a company’s cash flow. Companies with small cash reserves or other sources of capital may be inclined to adopt tighter loan management policies.

Communication:

Part of a good loan management policy should stress communication with other departments. Communication with the sales department can reduce conflict sometimes occurs when a sale is declined or affected because the loan department determines there is high level of risk involved in doing business with a particular customer. Communication with the collections department can provide warning signs of loan or credit default.

 Guidelines:

The purpose of this document is to provide directional guidelines that will improve the risk management culture, establish minimum standards for segregation of duties and responsibilities, and assist in the ongoing improvement of BKB.

The guidelines have been organized into the followings:

Policy guidelines:

• Lending Guidelines.
• Credit Assessment & Risk Grading.
• Approval Authority.
• Segregation of Duties.
• Internal Audit.

Management structure & responsibility.

Procedural guidelines:

• Approval Process.
• Credit Administration.
• Credit Monitoring.
• Credit Recovery.

Lending guidelines:

The lending guidelines include the following:

• Industry and business segment focus.
• Types of loan facilities.
• Single borrowers/group limits/syndication.
• Lending caps.

Loan assessment & risk grading:

Loan applications should summarize the result of the risk assessment & include, as a minimum, the following details:

• Environment or social risk inputs.
• Amount and type of loan (s) proposed.
• Purpose of loans.
• Loan structure (Tenor, Covenants, Repayment schedule, Interest).
• Security arrangements.
• Any other risks or issue.
• Risk triggers & action plan-condition prudent, etc.

 Approval Authority:

• Loan approval authority has been delegated to Branch Manager, loan Committee by the MD/Board.
• Delegated approval authorities shall be reviewed annually by MD/Board.
• Approvals must be evidenced in writing. Approval records must be kept on file with the loan application.
• The aggregate exposure to any borrower or borrowing group must be used to determine the approval authority required.
• Any loan proposal that does not comply with lending guidelines, regardless of amount, should be referred to Head Office for Approval.

 Segregation of Duties:

Bank will aim at segregating the following lending function:

• Loan approval/Risk management.
• Relationship management/marketing.
• Loan administration.

Loan facilities, principals, procedures and lending guidelines should provide a clear and consistent point of reference for all employees and prevent misunderstanding, confusion or omission by personal dealing with loan issues. Additionally, loan policies help prevent deviation from the overall lending principles and loan culture.

Loan procedures support the delivery of loan products, help to avoid undue process and serve as an efficient mechanism in granting of facilities and the administration of the risk asset portfolio.

Types of Credit Facility by BKB

The total loan disbursement of BKB can be classified into three major groups these are:

1. Short term loan

2. Medium term loan and 

3. Long term loan

BKB offers both funded and non-funded loan facilities. Among all the funded and non funded facilities BKB does not provide all but those, which are commensurate with the Bank’s policy and strategy. The various funded and non funded loan facilities that BKB provides to its borrowers are:

Funded Facilities:

The funded loan facilities are those, which involve direct cash. In other words any type of loan facility, which involves direct outflow of Bank’s fund on account of borrower is termed as, funded loan facility. The following funded loan facilities are provided by BKB.

Bangladesh Krishi Bank provides different kinds funded loan especially in Agriculture sector of our country. These loans have low interest rate which facilitates our people who involve in agriculture. In this section of report we will discuss about the different types of loan that BKB offer.

BKB finances the following seven sectors, which are given below:

1. Crop
2. Fisheries
3. Live Stock
4. Agro-equipment and farm  machineries
5. Agro processing industries
6. Continuous Loan
7. Poverty Alleviation and Micro Credit Programs
8. Special Recovery Activities/ program
9. SME
10. Others

CROP:

Crop is one of the important sectors of Bangladesh agriculture. In this sector the total number of manpower involved are more than 57% of the total. And in the national GDP the portion of the CROP sector is approximately 11.7%. So 60% of the total allocation of loan of Bangladesh Krishi Bank is reserved for crop alone. This program attends all the seasonal crops and the target people are land owners, share cultivators, and marginal farmers. Rate of interest is very much within the reach of these people around 8%. The important sectors of Crop sector are:

1. Loans in the food crops. (Rice, Jute, Wheat etc.)
2. Cash crops.
3. Horticulture.
4. Loan for gardening and nursery.
5. Tea state.
6.  SmallHoldingTeaState in Chittagong Hill Tracts.
7. Loan in the emerging sectors of agriculture.

In development of Bangladesh’s economy it is one of the important sectors. This sector can create the employment of people, meets the local demand for fish and also can earn foreign currency through exports of fish. BKB disburses loan for fish culture and fish hatcheries.  Cultivation of sweet water fish and Shrimp gets loan. Hatcheries for fish and Shrimps are considered for BKB’s loan. The loan disbursed in this year in this sector is 296.47 cores.

LIVE STOCK:

In our country Livestock sector has enough importance for the development of our economy. In our country this sector can meet the local demand for meat, milk, skin, bones etc. And this sector can earn foreign currency also. To reduce the dependence of import and increase the export of child food, meat and skin. BKB provides loan in this sector. Aim of the project is to create self employment.  BKB provides loan for:

1. Buying cows.
2. Beef fattening.
3. Dairy farm.
4. In Poultry farming.
5. In goat farming.

CULTIVATION & IRRIGATION:

Bangladesh Krishi Bank presents loan for mechanizing cultivation and irrigation. People are interested now to switch over from traditional machinery system to modern one. So this a timely approaches to provide loan in this sector. BKB also patronize manufacture and marketing of farm equipment. Besides the bank offers credit for poultry and dairy firms and for export oriented food and fish processing plants.

POVERTY ALLEVATION PROGRAM:

BKB is working to ensure the development of the rural and poor people. BKB is providing loan in this sector to make the proper use of the rural manpower towards the development of the country. BKB is providing loan in the13 sector under this program. They are:

1. Loan to the landless and marginal farmers.
2. Joint lending for poverty eradication.
3. Self are sustaining lending.
4. Improvement of the labor force.
5. South Asian Poverty Eradication Program.
6. United Nation’s farmer’s development program.
7. BKB-NGO micro credit program.
8. Cow farming for the women.
9. Autistic development program.
10. SME development for Manipuri.
11. Development program for Rakhains.
12. Special loan for Manipuri people in Shylet.
13. Working facility for the rural women.

SME LOAN:

SME plays a vital role in our economy. SME is one the major source of self employment. To make skilled entrepreneur BKB finance in this sector. To establish the Brain Resource as an important alternative to Venture capital SME loan is provided. BKB logically imposes sufficient emphasis on it. Major Fields for banks interest are-

1.  Electrical and electronics.
2. Software.
3. Light engineering.
4. Agro-based all fields.
5. Leather and leather goods.
6. Garments.
7. Plastic and synthetics.
8. Health care.
9. Education.
10. Pharmaceuticals.
11. Faison goods.

The credit range in this sector is taka 2.0 lac to taka 500.00 lac. The interest rate is quite logical and viable.

Corporate Finance and Other Project Loans

Project loan normally has fixed maturity and it relates to term investment. As such it requires appraisals of those proposals to have a rational decision. Appraisal may be termed as assessment of viability over a period of time.

These loans are usually made for:

• Setting up of industries and to meet working capital
• Balancing, Modernization, Replacement and Expansion (BMRE) of existing industries.

OTHERS TYPES OF LOANS BY BKB:

Over draft facility is also a continuous loan arrangement on a customer’s current account permitting him/her to overdraw up to a certain approved limit for an agreed period. Here the withdrawal of deposits can be made any number of times at the convenience of the borrower, provided that the total overdrawn amount does not exceed the agreed limit. Customer can return any amount at any time within the pre-fixed time of the facility. Turn over of an Over Draft facility is the most important phenomenon on which renewal of the facility depends. Over Draft facility is given to the businessmen for financing working capital requirement and high net worth individual to overcome temporary liquidity crisis.

Secured Over Draft

This is a type of over draft facility given to the borrowers keeping sufficient collateral from the customer in the most liquid form. This facility provides specific right to a client to overdraw within a pre fixed limit for a certain period of time. Secured over Draft is normally granted against the security of tangible asset such as lien of Fixed Deposit Receipt (FDR), Bonds, Sanchaya Patra but currently Secured Over Draft is given only against Fixed Deposit Receipt because Bangladesh Bank has recently prohibited Secured Over Draft against Bonds and Sanchaya Patra. Interest charged on the Secured over Draft is calculated on the basis of the security lined.

Term Loan

Terms loans are given to finance the acquisition of capital assets. Loan agreements often contain restrictive covenant and loan is repayable in accordance to amortization schedule. Collateral is must for term loan. Under term loan there are three categories:

*  Short term Agricultural loan- loans having maturity less than one year falls under this category. The loan items under this category are:

1. General short term loan.
2. Special lending activities of 100 core Taka.
3. Loan in the disastrous region.
4. Lending activities with Bangladesh Mission.
5. Lending activities for the process and marketing of agricultural products.

*  Midterm Agricultural loan- this loan facility is extended for loans having maturity more than one year but less than three years. The loan under this category are:

1. Mid-term general loan activities.
2. Mid term Loan in the disastrous region.
3. I.D.B.I loan 1&2.
4. A.D.B loan 1&2.
5. USAID IRI cultivation program.
6. Ret culture.

*  Long term Agricultural loan- tenure of long term loans is more than three years. The loans under this types are:

1. A.D.B loan 1&2.
2. USAID IRI cultivation program.
3. Japan assistance.
4. Improvement of tea sector.
5. Ret culture.

Syndicate Loan

A Bank can lend up to 15% of its paid up capital without any approval by Bangladesh Bank. If the loan amount exceeds 50% of the paid up capital then Bank goes for Syndicate loan. Lead Bank makes the arrangement and Head Office makes the facility agreement by the Bank’s lawyer. All terms and conditions such as security sharing, mode of creating charges, mode of repayment, covenants of the loan are written on the facility agreement.

Cash Credit

BKB also offers personal cash credit facility to its customers for buying household appliances, agricultural machineries, for business. Securities are kept for such type of credit facility but a guarantee from third party is required who ought to be a prominent person or government service holder. Anyone with continuous employment for a reasonable length of time in an organization is entitled to enjoy this facility. A quotation needs to be submitted on the office pad from where the goods will be purchased. Limit of personal credit ranges varies with the financial strength of the mortgage. And interest rate is 15.00%, which is subject to change.

The objective of this loan is to provide cash credit durables to the fixed income group (Service holders) and other eligible borrowers under the scheme for following business area.

Items of Investment under Cash Credit:

1. Refrigerator / Deep Freeze
2. Television / VCR / VCP / Dish Antenna
3. Buying cows.
4. Beef fattening.
5. Dairy farm.
6. In Poultry farming.
7. In goat farming.
8. MusicCenter
9. Motor Car / Motor Cycle
10. Air –Cooler / Air – Conditioner
11. Personal computer
12. Washing Machine
13. Household Furniture & Fixtures
14. Sewing Machine
15. Kitchen appliances like Oven, Toaster, Pressure Cooker, Blender etc.
16. Any other item not specified above but considered essential.

Non funded facilities:

Non funded facilities are also known, as contingent facilities are those where bank’s fund is not required directly. A non-funded facility can be turned to a funded facility as per situation creates. Bank receives commission rather than interest income by providing non-funded facilities. Following non-funded facilities are provided by BKB:

Letter of Credit (L/C)

A letter of credit can be defined as a Credit Contract whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed upon conditions. Since the agreed upon conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called Documentary Letter of Credit. The Uniform Customs & Practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (ICC, 1993) Revision, Publication No. 500 defines Documentary Credit.

Any arrangement however named or described, whereby a bank (the “issuing bank”), acting at the request and on the instructions of a customer (the “applicant”) or on its own behalf,

1) Is to make a payment or to the order of third party (the Beneficiary), or is to accept and pay bills of exchange (Drafts) drawn by the Beneficiary, or

2) Authorized another bank to effect such payment, or to accept and pay such bills of exchange (Drafts),

3) Authorizes another bank to negotiate, against stipulated document (s), provided that the terms and conditions are complied with.

BKB provides only irrevocable letter of credit (L/C) facility.

 LOAN DISBURSEMENT BY BKB:

The amount of money disbursed by BKB in the year 2010-11 is given below:

Bangladesh Krishi Bank has been engaged in foreign exchange business since 1980. It deals with all kinds of export, import, remittance and other sorts of foreign exchange business.BKB has got 200 major correspondent banks globally and maintain sufficient number of Nostro Accounts in various foreign currencies with different leading banks in the important business centre of the world. BKB has taken massive foreign exchange programmers to increase business. Import of capital machinery and raw materials for agro processing industries and export of agricultural products, foreign remittance and all sorts of foreign exchange transactions and services provided by BKB. Products and services in case of international banking are given below:

• Letter of Credit. (LC)
• Bill purchase/ Discount.
• Export Credit. (Pre shipment and Post shipment).
• Remittance (Inward/ Outward)
• Collection, purchase and sale of foreign currencies and Travelers cheque.
• Maintenance of student education file.\
• Guarantees in foreign currencies.
• Foreign Currency accounts.
• NFCD (Non-resident Foreign Currency Deposit) A/c.
• RFCD (Resident Foreign Currency Deposit) A/c.
• Forward Contracts.
• Correspondent Banking Relations.
• Taka Drawing Arrangement.
• Dealing room.
• S.W.I.F.T (Society for Worldwide Inter bank Financial Telecommunication.)

PRODUCTS AND SERVICES OF BKB:

Although the central attention of BKB is agriculture. It doesn’t abandon other fields of the economy at all. All the businesses of the bank may be defined as follows:

• Corporate Financing.
• Credit Program.
• Deposit scheme
• International Banking.
• Loan services of BKB.
• Poverty Alleviation.
• Micro-credit program.

CORPORATE FINANCING

The Bank has started financing to renowned corporate bodies of the country for the last 2/3 years. This has opened a new arena of utilizing Agri-product marketing channel of the companies in easy terms and at a lower interest rate. Such companies are:

1. PRAN GROUP (Agriculture Marketing Company Ltd.)
2. SQUARE GROUP (Square Consumer Products Ltd.)
3. PARTEX GROUP (Partex Furniture Ltd.)
4. SUPREME SEEDS
5. PADMA GROUP
6. P.H.P GROUP
7. T.K. GROUP
8. ISPAHANI GROUP
9. SA GROUP
10. K.D.S GROUP
11. CITY GROUP
12. S. ALAM GROUP
13. MEGHNA GROUP
14. National Pharmaceutical Co. ltd. (NPCL)

 CREDIT PROGRAM:

Credit program may be called the prime function of the bank. This program includes the loans provided for crops, fisheries, livestock, farm and irrigation, agro based industries project, SME, Micro credit. More about credit program will be discussed in the credit section of the project part.

DEPOSIT SCHEME:

As a commercial bank BKB offers some well designed deposit scheme for the customer. These are Special Notice Deposit (SND), Fixed Deposit, Time deposit, Savings scheme, Educational Savings, etc. Under time deposits there are sub head like DPS,SPS, Teachers Savings, Hajj Deposit and Krishan-Krishani,

Types of deposits and interest rate related with particular deposits are given below:

FIXED DEPOSITS

 POVERTY ALLEVIATION:

Bangladesh Krishi Bank has taken up poverty alleviation as one of the fundamental jobs. It extends Micro Credit services for the people below the poverty level. Some of these services arranged by BKB alone and some are joint efforts. Local and international agencies collaborate in some cases. The international organization like United Nations, Asian Development Bank, SAARC are working with BKB in some projects.

It is now possible to say that BKB is performing its duties efficiently in developing the agricultural sector of the country. And at the same time helping the down trodden millions to come up above the poverty level through sustainable growth.

AN OVERVIEW OF CREDIT POLICIES AND ACTIVITIES OF BKB

Agriculture is the most important and profitable sector in Bangladesh. All of our economic activities have been developed based on agriculture. In this case Bangladesh Krishi bank is the leading financial institution for financing in agriculture. Bangladesh Krishi Bank strictly adheres to the regulatory policies, rules etc as regard to credit

Management and is in compliance with regulatory requirements as stipulated by Bangladesh Bank from time to time.

CREDIT POLICY OF BKB:

Bangladesh Krishi bank in fiscal year 2011-2012 decided to prepare a five years plan to disburse loan in different sector. The key point of their planning is given below:

► To develop and expansion of agriculture the bank will provide loan to all agro-based sector which involve in Agriculture.

► To facilitate, modernized, profitable of and to improve the life style of rural people BKB will pay special attention to the 7 sector such as: Crops, Fisheries, Live stock, Agro-equipment and firm machineries, Agro based industries, Continuous loan, Poverty alleviation and Micro-credit program.

► To identify different sector which increase the price of agro product and distribution BKB work for those sector and give loan to improve the situation.

► To face the growing amount of loan demand in every year BKB will increase the amount of loan disburse in the agricultural sector. To reduce the use of traditional systems in agriculture.

►Using advanced scientific technologies.

►Exporting agricultural food products.

►To change the current cropping pattern and increase the cropping intensity.

DISBURSEMENT YEAR BY YEAR

 LOAN LENDING PLANING OF BKB:

Bangladesh Krishi Bank declares theirs loan disbursement goal for the upcoming fiscal year in the last week of the month June. For the 2012-13 fiscal years the 6000 core Taka will be disbursed. Special features of lending procedure for the year 2012-13 are-

• To reduce the use of traditional systems in agriculture.
• Using advanced scientific technologies.
•  Exporting agricultural food products.
• To change the current cropping pattern and increase the cropping intensity.

Loan disbursement target of BKB for the year 2012-13 is given below:

  PRINCIPLES OF LENDING:

Banks are profit oriented organization for which a bank invests its funds in many ways to earn income. At the same time bank runs the risk of default in repayment. As such the banks are required to follow certain basic principles of lending. The lending principles of BKB govern its extension of credit facilities. These principles are strictly followed to shape and define the acceptable risk profile of Bank Asia. These principles are:

*  Know Your Customer: Know Your Customer (KYC) is the most important guiding principle of BKB for extending credit facilities to its prospective borrowers. Complying with this principle helps the bank to avoid money laundering crime and adverse selection of borrowers.

*  Safety: Safety depends first upon (i) the security and its value offered by the borrower and (ii) the repaying capacity and willingness of the borrower to repay the loan with interest.

*  Liquidity: It refers to the ability of an asset to be converted into cash without loss and within a short time to meet depositor’s demand for cash.

*  Profitability: BKB must employ its fund in such a way that they will bring adequate return for the bank, which should be more than cost of the funds.

*  Purpose: The purpose for which BKB will provide loan should be productive so that the money not only safe but also provides a definite source of repayment.

*  Spread: It refers to the diversification of advance. BKB always provide loans at a lower rate than the other commercial banks. Though profit is not the main aim of lending of BKB but So far BKB could maintain considerable margin on its disbursed loan. Recently Bangladesh Bank has imposed restriction on lending rate and to comply with Bangladesh Bank policy guidelines, BKB always follows lending guidelines of Bangladesh Bank.

 STRATEGIES OF LENDING PROCEDURE:

A loan policy gives loan officers, relationship managers and the Bank’s management specific guidelines in making individual loan decisions and in shaping the Bank’s overall loan portfolio. One of most important ways a Bank can make sure its loans meet regulatory standard and are profitable is to establish a written loan policy.

BKB also has a good loan policy and the most important elements of the policy are stated below:

• A goal statement for the Bank’s loan portfolio (in terms of types, maturities, sizes, and quality of loans).
• Specification of the lending authority given to each loan officer and loan committee (measuring the maximum amount and types of loan that each person and committee can approve).
• Lines of responsibility in making assignments and reporting information within the loan department.
• Operating procedures for soliciting, reviewing, evaluating, and making decisions on customer loan applications.
• The required documentation that is to accompany each loan application and what must be kept in the Bank’s credit files (required financial statements, security agreements etc).
• Lines of authority within the bank regarding who is responsible for maintaining and reviewing the Bank’s credit files.
• Guidelines for taking, evaluating and perfecting loan collateral.
• A presentation of policies and procedures for setting loan interest rates and fees and the terms for repayment of loans.
• A statement of quality standards applicable to all loans.
• A statement of the preferred upper limit for total loans outstanding (i.e. the maximum ratio to total loans to total assets allowed).
• A description of the Bank’s principal trade area, from which most loans should come.
• A discussion of the preferred procedures for detecting, analyzing and working out problem loan situations.

A written loan policy statement carries a number of advantages for the bank adopting it. It communicates to employees working in the loan department what procedures they must follow and what their responsibilities are. It helps the Bank moves forward a loan portfolio that can successfully blend multiple objectives such as promoting the bank’s profitability, controlling its exposure and satisfying regulatory requirements.

CLASSIFICATION OF LOANS AND PROVISIONING

Loan classification is a process by which the risk or loss potential associated with the loan accounts of the Bank on a particular date is identified and quantified. It is done to determine the level of reserves to be maintained by the Bank for the probable loss on that risky loan account.

 Unclassified Loans

An unclassified loan or commitment is one that is set by Bangladesh Bank or the Head Office of the Bank. Unclassified loans are those loans in which repayment is regular.

Classified Loans  

A classified loan or commitment is one that is classified as substandard, Doubtful or Loss as per policy of loan classification set by Bangladesh Bank or Head Office of the bank.

Loan Classification means to categorize the debt information in a systematic manner. But in true sense it is defined in terms of degree of risk associated with these loans. The objectives/importance of loan classification is:

• To find out Net Worth of a bank;
• To assess financial soundness of a bank;
• To calculate the required provision and the amount of interest suspense;
• Strengthen credit discipline;
• To improve loan recovery position and
• To put the bank on sound footing in order to develop sound banking practice in Bangladesh.

Position of classified loans and advances and other assets should be placed before the Board of directors of the bank.

 EVALUATION OF THE BKB’S LOAN PRODUCTS, PRINCIPALS AND STRATEGIES

 LOAN PRODUCTS EVALUATION

Bangladesh Krishi Bank was established due to work for the development of the agricultural sector of the country. It was established in 1973 but started its commercial banking activities in the year 1976. Now is the period of innovations. There are 52 commercial banks operating in the country excluding other non banking financial institutions. In this competitive banking arena a bank must come up with new and easily accessible customer focused loan products. BKB offers a limited number of loan products to its customers. As BKB’s targeted customer is the poor and minor people. BKB also helps in the foreign business for the businessman. And for helping the international business of agricultural products and development of agro-based industries.

The loan mix of the bank is very conventional. It has been observed that the existing loan products are insufficient to meet up the existing borrower’s need. The bank has no loan products for the religious Muslim borrowers. It has caused the bank to lose a large segment of the potential borrowers. The bank has yet to establish credit card facility which could pull a large number of borrowers because due to safety need, increasing number of people are being interested in having this facility. BKB is still lagging behind the other commercial banks in terms of product diversity in credit.

But BKB has promised to incorporate new loan products in its loan mix portfolio. The bank is trying to computerize all its branches. BKB is planning to start online banking for providing good services to its customers.

EVALUATION OF LENDING PRINCIPLES

Bank Asia follows well constructed lending principles starting with KYC or Know Your Customer and ending with Spread. KYC is getting increasing emphasis in the banking arena because loan default rate is high in our country. Proper compliance with KYC can help the banks to avoid bad loans. The BKB still maintains adequate safety in its loan portfolio, which is reflected in its low default rate. The bank was able to establish confidence in the minds’ of the customers regarding maintaining adequate liquidity to meet up the borrowers’ requirement.

At the same time the bank was able to remain profitable in terms of interest income maintaining a higher spread. So far BKB was able to perform well in its loan portfolio but the scenario is changing very rapidly. Lending rate is lower than any other banks of Bangladesh. The bank has to adopt necessary strategy to maintain its profitability from the loan portfolio. And also BKB should follow their existing lending principle towards the development of the agriculture of our country.

STRATEGY EVALUATION

Strategy provides guidelines to BKB to device a smooth lending procedure. As mentioned earlier, BKB does not have a very diverse loan products but it provides short term, mid term and long term loans. Size of the credit varies from fifty thousand taka for personal credit to several cores for syndicated loans. BKB has a preference for rural farmers, minor people development of the women.

BKB also finances SME (Small and Medium Enterprise), provides personal credit, export and import finance. BKB finances in the corporate sector mainly agricultural based industries. But BKB is in constant search of profitable business sector for extending credit line. Bank has also taken safe guard against predicted alteration in the world trade policy. As MFA (Multi Fiber Agreement) was phased out from December 2004, many of the country’s garments factories were under the threat of lay off. The experts of the bank are anticipating that the situation after last year were seriously jeopardize the banking sector because most of the banks have heavily financed in the export oriented RMG (Ready Made Garments) sector.

BKB’s main motto is to ensure the proper development of agriculture by modernizing, marketing and improving the standard of living of the rural and urban people. That’s why BKB is not confining their lending activities in limited sectors. Rather providing loan to ten sectors. BKB has ensured the quality of loan by proper mortgage loan in different sector.

Agriculture is the most uncertain sector to finance but BKB is financing successfully in this sector. Agro-based industry’s improvement is dependent to the loan provided by BKB.

Recovery Status of BKB

The perspective of the Basel 2 implementation has encouraged bank to conduct a number of studies on the impact that new rules will have on credit management, according to the specific characteristics of the lender. With regard to BKB, studies tend to highlight the opportunities related to the use of complex credit management tools for internal management purposes, as well as the limitations related to the assessment of the value of the relationship between customer and bank.

Available studies on credit management for BKB focus on the characteristics of this type of bank, such as size, type of customer base and field of activity, showing how its specificity can affect the riskiness of its loan portfolio. In detail, the evidence provided attempts to prove the greater capacity of this bank to select and monitor their borrowers, compared to the banking system as a whole.

This paper focuses on the phase subsequent to borrower default, with the aim of assessing whether the special nature of these banks is also reflected in the effectiveness of the loan recovery process. Therefore, the analysis is aimed at assessing the significance of the characteristics of the BKB, with respect to another driver of the expected credit loss, with a view to highlighting if the differences proposed in the relevant literature–in terms of the probability of insolvency–are consistent with the differences reported in terms of the effectiveness of the recovery process, or if the two risk factors offset each other.

Internal controls of loan recovery:

An area that plays a crucial role in the control of loan recovery is its system of internal controls. Effective internal controls enhance the safeguards against system malfunctions, errors in judgment and fraud. Without proper controls in place, management will not be able to identify and track its exposure to risk. Controls are also essential to enable management to ensure that operating units are acting within the parameters established by the board of directors and senior management.

Seven aspects of internal controls deserve special attention:

1. Information Systems. It is crucial that effective controls are in place to ensure the integrity, security, and privacy of information contained on the credit union’s computer systems. In addition, the loan recovery should have a tested contingency plan in place for the possible failure of its computer systems.
2. Segregation of Duties. The loan recovery should have adequate segregation of duties and professional resources in every area of operation. Segregation of duties may be limited by the number of employees in smaller loan recovery.
3. Audit Program. The effectiveness of the loan recovery’s audit program in determining compliance with policy should be reviewed. An effective audit function and process should be independent, reporting to the Supervisory Committee without conflict or interference with management. An annual audit plan is necessary to ensure that all risk areas are examined, and that those areas of greatest risk receive priority. Reports should be issued to management for comment and action and forwarded to the board of directors with management’s response. Follow-up of any unresolved issues is essential, e.g., examination exceptions, and should be covered in subsequent reports. In addition, a verification of members’ accounts needs to be performed at least once every two years.
4. Record Keeping. The books of every loan recovery should be kept in accordance with well-established accounting principles. In each instance, a loan recovery records and accounts should reflect its actual financial condition and accurate results of operations. Records should be current and provide an audit trail. The audit trail should include sufficient documentation to follow a transaction from its inception through to its completion. Subsidiary records should be kept in balance with general ledger control figures.
5. Protection of Physical Assets. A principal method of safeguarding assets is to limit access by authorized personnel. Protection of assets can be accomplished by developing operating policies and procedures for cash control, joint custody (dual control), teller operations, and physical security of the computer.
6. Education of Staff. Loan recovery staff should be thoroughly trained in specific daily operations. A training program tailored to meet management needs should be in place and cross-training programs for office staff should be present. Risk is controlled when the loan recovery is able to maintain continuity of operations and service to members.
7. Succession Planning. The ongoing success of any loan recovery will be greatly impacted by the ability to fill key management positions in the event of resignation or retirement. The existence of a detailed succession plan that provides trained management personnel to step in at a moment’s notice is essential to the long-term stability of a loan recovery. A succession plan should address the Chief Executive Officer (or equivalent) and other senior management positions (manager, assistant manager, etc.).

 LOAN-PRICING METHOD:

In pricing a business loan, Bank management must consider the cost of raising loan able funds and the operating costs of running the Bank. This means that Banks must know what their costs are in order to consistently make profitable, correctly priced loans of any type. There is no substitute for a well-designed management information system when it comes to pricing loans.

The BKB is generally used the simplest loan-pricing model which assumes that the rate of interest charged on any loan includes four components: (1) the cost to the Bank of raising adequate funds to lend, (2) the Bank’s non-funding operating costs (including wages and salaries of loan personnel and the cost of materials and physical facilities used in granting and administering a loan), (3) necessary compensation paid to the Bank for the degree of default risk inherent in a loan request, (4) Bank’s desired profit margin.

These sector-wise interest rates have been introduced by the Head Office of the BKB. They use cost-plus pricing method in case of pricing the loans. The fourteen branches of the Trust Bank Limited have maintained these rates strictly except in case of some quality and credit-worthy lenders. After judging the lenders’ credit-worthiness, the BKB gives some beneficiary to this kind of lenders. They can enjoy a decreasing interest rate, which maintained by the BKB branches internally. Other wise, the scheduled rates are maintained by all the BKB branches. In case of Micro Credit, as the loan amount is not so large that’s why the scheduled rate is maintained by the Bank. Actually, the Lending rate is based on the prescription, which is given by Bangladesh Bank.

The recovery performance of the bank was not so good during the period 1999-2002. The credit administration and monitoring of this bank was inexperienced. This bank is monitoring and all the loans are sanction by the high authority whose are high officials of Bangladesh Army. This Bank has a common thinking that the people who taking loan from this bank always think that this is an army bank so if I failed to pay then it will be a very big problem for me. But this thinking did not work properly. That’s why the management has to think about a well-designed Recovery Policy.

 BKB’S Recovery Probability Categories to Be Assigned to All Classified Loans Category

Loans determined to have high probability of recovery within 6 months; recovery efforts to continue on an on-going basis.

Loans determined to have moderate probability of recovery within 1 year; review recovery efforts on a 3 months basis.

Loans determined to have low and remote probability of recovery; review case on a 6 months basis.

Loans determined to have virtually no chance of recovery: charge-off the books. However in this situation proper approval from the appropriate approving authorities should be obtained and also shall be guided by Bangladesh Bank instructions and subject to complete analysis of:

Banking practice.

Legal and tax implication and

Status of each individual credit.

Notes for assessment of category

Estimate the cost of continued collection efforts against any money, which can be reasonably expected to be recovered. Include in the cost (1) employee man-hour, (2) legal expenses, (3) charge of any external collection agency if used.

 Why Recovery takes so much time

Only because of existing rules and regulation recovery is a time consuming procedure. I think an example will make this thing clear. Let, Mr. X took loan from Y bank by giving a land as registered mortgage and become bad. Now bank cannot sell the land without the permission of court though the land was as registered mortgage to bank. So bank has to sue against Mr. X and court send notice to Mr. X. But Mr. X can delay his coming by saying he is sick and asking for more time. Court gives new date to settle the matter. Then on new date a person came to the court saying that he is the brother of the client and the land is their father’s property. And most importantly, client didn’t notify him before give the land to the bank. So court asks him to prove his claim. Finally, if court gives injunction in favor of bank, they face problem to sell

the land. Because client put mussel-men protect the land from bank. Moreover people are not interested buy land on occasion from court. Finally the interesting thing is most of the time the same client but the land in another name.

Criteria of loan:

Recovery Data (for 2012):

  Recovery of Classified Loan

Based on the evaluation of different aspects of the loan process of Bangladesh Krishi Bank, the following recommendations have been made:

• To combat the problem of mobilizing deposit in the form of loan, Bangladesh Krishi Bank should focus on intensive marketing effort.
• Entrepreneurship lending should be given due emphasis.

As borrower selection is the key to successful lending, BKB should focus on the selection of true borrower.

Care should also be taken so that good borrowers are not discarded due to strict adherence to the lending policy.

• Monitoring of a loan should be conducted at regular interval to enhance the borrower is properly maintaining the mortgage property and utilizing the borrowing money.
• In case of mortgage, care must be taken to accept collateral on second charge.
• In case of assignment the bank must ensure that the assignment debtor has given undertaking.
• Reporting of all loans should be periodically made to Bangladesh Bank.
• Loan monitoring is a continuous task and requires expert manpower.

CONCLUTION:

Most of the Banks in Bangladesh are offering a wide array of financial services including new types of loans and advances and some whole new services are being launched every year. BKB, a bank of difference, also has discovered new avenues to reach its goals.  For the brand name, it is gone to people’s heart through updating various services. Bank BKB should diversify its credit portfolio BKB so that in near future when competition among Banks will serve, it can stand with its own identity. The Credit Risk Management method that may seem fit today may not work tomorrow. So all the Financial Institutions must find their own method in order to sustain in the changing world. Central focus in this regard would be to have a comprehensive Information Technology system, sufficient expertise and above all very relaxed management to adopt new idea to update Credit Risk Management method.  Now BKB is continuing business operation successfully in Bangladesh through developing an image and goodwill among its clientele by offering its excellent services. The success has been resulted from the dedication, commitment and dynamic leadership of its management. During the short span of time of its operation, BKB has successfully grabbed a position as a highly progressive and dynamic financial institution in the country. By proliferation of new advance services, expanding use of automated equipment and electronic transfer of financial inform BKB action, will be the country’s first largest institution in the near future.