Report on Policies and Credit Management in Premier Bank

The major purpose of this report is based on the Policies and Practices Credit Management in Premier Bank Limited (PBL). Other objectives are to find out the major problems relating to the management of banking and get a clear idea on general marketing strategy, promotional activities and credit management. Finally identify the Strengths, weaknesses, opportunities and threats of credit management of banking in Bangladesh especially The Premier Bank Limited.

Objective of the Report:

Broad Objective:

The primary objective of the study is to meet the partial requirements to fulfill the BBA degree from Comilla University under Management Studies Department and to enhance the practical knowledge about the specific area of the Banking sector of Bangladesh.

Specific Objectives:

• To attain knowledge about banking organization of Bangladesh
• To have better idea about role of banking the sector of Bangladesh
• To find out the major problems relating to the management of banking
• To acquire in depth knowledge about the general marketing strategy, promotional activities and credit management of banking in Bangladesh
• To identify the Strengths, weaknesses, opportunities and threats of credit management of banking in Bangladesh especially The Premier Bank Limited.
• To observe and analyze the performance of some institutions and make a comparisons between Private and Public Banking credit management Systems in the Country.

An Overview of Banking in Bangladesh

Economic development is the pre-condition for any kind of development of a country. To sustain such kind of development the contribution of different financial organization is important. Now-a-days Banking sector is the rising sector in-case of economic development. Bank has played a vital role in the context of industrialization. The present condition of banking in Bangladesh is not economic favor because of political unrest and nepotism etc. To develop the industrial sectors financial assistance is important. Without financial assistance no industrial organization can establish. So the banking organization should come forward to assisting different manufacturing and non manufacturing organization to develop the industrial sector. Economic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is the highest in the initial stage. Schumpeter (1933) regarded the banking system as one of the two main agents (other being entrepreneurship) in the whole process of development. Keynes also emphasized the role of banking services in the process of economic development of a country, while he was addressing the House of Lords regarding International and 10 Monetary System (quoted in Sharma 1985). Moreover Alexander Gerashchenko (1962) in his popularly known “Gerschenkron’s Hypothesis” explained the banking system as the key role player at certain stage of the industrialization process.

Modern banking system plays a vital role for a nation’s economic development. Over the last few years the banking world has been undergoing a lot of changes due to deregulation, technological innovations, globalization etc. These changes in the banking system also brought revolutionary changes in a country’s economy. Present world is changing rapidly to face the challenge of competitive free market economy. It is well recognized that there is an urgent need for better, qualified management and better-trained staff in the dynamic global financial market. Bangladesh is no exceptions of this trend. Banking Sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future.

History of Banking:

Bangladesh inherited its banking structure from the British regime and had 49 banks and other financial institutions before the Partition of India in 1947. The Dhaka Bank established in 1806 was the first commercial bank in the Bangladesh region of British India. Bengal Bank, the first British-Patronized modern bank established in India in 1784, had opened its two branches in 1873 in Sirajganj and Chittagong of Bangladesh region. Later in 1862, the Bengal Bank Purchased the Dhaka Bank and opened its first branch in Dhaka in the same year by reconstituting and merging the Dhaka Bank. Thereafter, another branch of Bengal Bank was opened in Chandpur in 1900. A number of other branches of Bengal Bank were opened in this region and some branches had been closed in Course of time. There were six other branches of Bengal Bank in operation in the territory of Bangladesh until the Partition of British-India in 1947 and these branches were at Chittagong (1906), Mymensing (1922), Rangpur (1923), Chandpur (1924), and Narayanganj (1926). Following the emergence of Pakistan in 1947, State Bank of Pakistan, the Central Bank of the country, came into being in July 1948. Later, the National bank of Pakistan, a strong commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation in the whole Pakistan until 1971. Pakistanis owned most of these banks and only three of them namely, National Bank of Pakistan, Habib Bank Ltd. and the Australasia Bank Ltd, had one branch of each in East Pakistan in 1949. During 1950-58, there other Pakistani-owned banks, Premier Bank Ltd., Bank of Bhowalpur Ltd. and Muslim Commercial Bank, had opened their branch in East Pakistan. Four Pakistan-owned banks, the United Bank Ltd., Union Bank Ltd., Standard Bank Ltd. and the commerce Bank Ltd. Conducted banking business in the Province during 1959-1965.But all of them Had their headquarters in west Pakistan. East Pakistan had only two banks Owned by local business groups white headquarters in Dhaka. These were the Eastern Mercantile Bank Ltd. (Presently Pubali Bank Ltd.) and Eastern Banking Corporation Ltd. (Presently Uttara Bank Ltd.) established in 1959 and 1965 respectively. In the beginning of 1971, there were 1130 branches of 12 banks in operation in East Pakistan. The foundation of independent banking system in Bangladesh was laid through the establishment of the Bangladesh Bank in 1972 by the Presidential Order No. 127of 1972 (which took effect on 16^th December, 1971). Through the Order, the eastern branch of the former State Bank of Pakistan at Dhaka was renamed as the Bangladesh Bank as a full-fledged office of the central bank of Bangladesh and the entire undertaking of the State Bank of Pakistan in, and in relation to Bangladesh has been delivered to the Bank.

Bangladesh Bank has been entrusted whit all of the traditional central banking functions including the sole responsibilities of issuing currency, Keeping the reserves, formulating and managing the monetary and credit policy, regulating the banking system, stabilizing domestic and external monetary value, preserving the par value of Bangladesh Taka, fostering economic growth and development and the development of the country’s market.

The Bangladesh Banks (Nationalization) Order enacted in 1972 nationalized all banks except foreign ones. Six nationalized banks were formed through merging the existing banks of the period.

The rate of growth and development of banking sector in the country was extremely slow until 1983 when the government allowed to establish private banks and started denationalization process: initially, the Uttara Bank in the same year and thereafter, the Pubali Bank, and the Rupali Bank in 1986. Growth pattern of banks during the period is 1973-1983.

History of Private Banks in Bangladesh

There were no domestic private commercial banks in Bangladesh until 1982; When the Arab-Bangladesh Bank Ltd. commenced private commercial banking in the country. Five more commercial banks came up in 1983 and initiated a moderate growth in banking financial institutions. Despite slow growth in number of individual banks, there had been a relatively higher growth of branches of nationalized commercial banks (NCBs) during 1973-83. there number had increased from 1512 in 1973-74 to4603 in 1982-83.

Financial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slower than expected pace. Overall health of the banking system showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led significant improvement in the profitability ratios. Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still weak and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk-

• Rationalization of prudential norms for loan classification and provisioning,
• Policy for rescheduling of loans,
• designing and enforcing an “integrated credit risk grading manual”,
• Credit rating of the banks, and
• Revisions to the make-up of Tier-2 capital.

Besides, recent decision of the Government to corporative the remaining three NCBs along with the initiative to sale the Rupali Bank are bound to usher in changes in the banking sector competitiveness aspect. Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further, the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of the Micro Finance Institutions (MFI) has been a major development in the year 2006. Since 1998 CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating model by incorporating the market risk and the new Model is known as CAMEL

Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs underway in the process of economic development. They collect savings of large masses of people scattered throughout the country, which in the absence of banks would have remained idle and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of world’s most underdeveloped economics. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for 12 reforming financial sector. Since, 1990, Bangladesh government has taken a lot of financial sector reform measurements for making financial sector as well as banking sector more transparent formulation and implementation of these reform activities has also been participated by different international organization like world Bank, IMF etc.

World Economy:

Before healing up the wounds of 2007-2009, the world experienced the second wave of the financial turmoil in 2011; another sovereign debt crisis from Eurozone hit the global economy. Tormenting woes of credit crunch have shaken the developed countries with threats of economic recession. Fears of further meltdown also loomed over the US economy. High unemployment, shaken consumer & business confidence and financial sector fragility put the US economy under great pressure. The down-grading of US credit rating by standard and poor, the crisis in the Eurozone and disappointing German growth figures has increased uncertainty in the economies all over the world. Amidst the fragility and acute uncertainty, the world economy registered a 2.8 percent growth in 2011 from 4.0 percent in 2010. I n developed countries economic growth slowed considerably to 1.3 percent in 2011 down from 2.7 percent in 2010. Growth of developing countries and economies in transition slowed notably to a pace of 5.9 percent in the second half of the year. Throughout the year 2011, the US economy remained extremely vulnerable to external shocks, The European sovereign debt crisis was the biggest threat. The US has a fair amount f tread business with Europe.

Bangladesh Economy:

In the recent years, Bangladesh Economy has increasingly integrated with the global economy rising risks in the area of foreign trade, remittances, foreign aid, Foreign Direct Investment (FDI) etc. However the banking sector of the economy is mostly separated from international financial markets and does not offer sophisticated products. Bangladesh economy was not critically affected by the recent global meltdown and financial crisis much due to the well regulated norms for the exposure in the international market, but there was a lagged impact especially on foreign trade business, aid and inward remittance causing a mild decline in growth in 2011. The economy of the country in 2011 witnessed soaring inflation, hefty bank borrowings by Government, crash in capital market, rise in Government subsidies, fall in private sector credit flow, depreciation of Taka against Dollar, high import growth except capital machineries and raw materials, low foreign aid disbursement and recent account balance deficit, and these are unlikely to be solved very quickly.

Overview of the Premier Bank Limited:

On behalf of the Board of Directors, I have the pleasure to president the Annual Report 2011 of the Bank. Together I am including such Financial Statements as Balance Sheet, Cash Flow Statement, Profit & Loss Account and Auditors’ Report as December, 31, 2011. I am presenting a brief review of operations for the last year, as well as of the present economic scenario of our country in the background of global situation. The Premier Bank Limited is incorporated in Bangladesh as banking company on June, 1999 under Companies Act.1994. Bangladesh Bank, the central bank of Bangladesh, issued banking license on June 17, 1999 under Banking Companies Act.1991. The Head Office of the Premier Bank Limited is located at Bannani; one of the fast growing commercial and business areas of Dhaka city. Bangladesh economy has been experiencing a rapid growth since the ’90s. Industrial and agricultural development, international trade, inflow of expatriate Bangladeshi workers’ remittance, local and foreign investments in construction, communication, power, food processing and service enterprises ushered in an era of economic activities. Urbanization and lifestyle changes concurrent with the economic development created a demand for banking products and services to support the new initiatives as well as to channelize consumer investments in a profitable manner. A group of highly acclaimed businessmen of the country grouped together to responded to this need and established Premier Bank Limited in the year 1999. The Bank was incorporated as a public limited company under the Companies Act. 1994. The Bank started its commercial operation on Oct. 26, 1999 with an authorized capital of Tk. 1,000 million and paid up capital of Tk. 222 million. The paid up capital of the Bank stood at Tk. 3818.61 million as on December 31, 2011. The total equity (capital and reserves) of the Bank as on December 31, 2011 stood at Tk. 7291.19 million. The Bank has 64 branches and a wide network of correspondents all over the world. The Bank has plans to open more branches in the current fiscal year to expand the network. The Bank has a total number of 52 branches, 12 SME Service Centers and 1 Central Processing Centre as of March 2011. Plans open more by the end of 2011 to expand its network. The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the latest technology and a team of highly motivated officers and staff. The Bank has launched Online Banking services (i-Banking), joined a countrywide shared ATM network and has introduced a co-branded credit card. A process is also underway to provide e-business facility to the bank’s clientele through Online and Home banking solutions.

Premier Bank Limited Comilla Branch started on 29^st Decenmber, 2009. The First Branch Manager Back was Mr. Kazi Abdul Wadud. It was originally situated in Comilla at Mogultoli which was very visible to people entering Comilla and also it had a lot of potential customers surrounding that area. Any other information about history was unobtainable as all the employees have changed since then. Premier Bank Ltd. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments.

Organizational Overview of PBL, Comilla branch:

Premier Bank Limited Comilla Branch started on 29^th December, 2009. The First Branch Manager Back was Mr. Kazi Abdul Wadud FAVP & Manager. It was originally situated Mogultuli, Comilla which was very visible to people entering Comilla and also it had a lot of potential customers surrounding that area. Any other information about history was unobtainable as all the employees have changed since then. Premier Bank Ltd. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments. The present situation of The Premier Bank, Comilla Branch is better than time. The currently Manager Mr. Muhammad Muhibur Rahman khan, FAVP & Manager tried heart and soul to maximize the profit as well as wealth. Other officers are also very much cordial to provide customer service and branch development.

Vision of the Premier Bank Limited:

The bank has clear vision towards its ultimate destiny-to be the best amongst the top financial institutions.

Mission of the Premier Bank Limited:

The mission of the bank is-

• To be most caring and customer friendly provider of financial service, creating opportunities for more people in more places.
• To ensure stability and sound growth whilst enhancing the value of shareholders investments.
• To aggressively adopt technology at all levels of operations and to improve efficiency and reduce cost per transaction.
• To ensure a high level of transparency and ethical standards in all business transected by the bank.
• To provide congenial atmosphere which will attract competent work force who will be proud and eager to work for the bank.
• To be socially responsible and strive to uplift the equality of the life by making effective contribution for social development.

 Values of Premier Bank:

• Service first
• Easier banking
• Better relationship
• Assured confidentiality
• Good corporate governance
• Corporate citizenships

Visions for 2012

They expect higher growth of business in 2012. The growth will presumably generate from the diversified corporate sector, personal banking, money market operations, structured financing, Visa debit and pre paid card, ATM network and Export oriented initiatives. New innovative products like Capital Market, Bundled Savings Account, and Refurbished Home Loan etc. have been introduced to increase profitability. Another vision is to balance credit with deposit. Credit will be reduced below 80% of total deposit.

Strategies Objectives of PBL:

• Their objectives are to conduct transparent and high quality business operation based on market mechanism within the legal and social framework.
• Their greatest concerns are to provide their customers continually efficient, innovative and high quality products with excellent delivery system and slogan with “Service First”
• Their motto is to generate profit with qualitative business as a sustainable ever-growing organization and enhance fair returns to the shareholders.
• Establish PBL as one of the top five successful Private Commercial Banks by 2012.
• Be committed to the community as a corporate citizen and contribute towards the progress of the nation.
• Build a strong deposit base.
• Introduce new products & services and upgrade existing products & services at comparatively low cost in order to assure quick respond to the changing demands in the market.
• Promote the well being of the employees and raise their morale.
• Strengthen corporate identity and values.
• Fulfillment of their responsibility to the government by paying taxes and abiding by other rules.
• Bring the entire system under a very advanced IT platform.
• Socialize and present the bank to the community as a corporate partner.
• Encouraging and motivating the new entrepreneurs to establish industries and business in line with development of national economy.
• Enhancing savings tendency of the people by offering attractive and lucrative new savings scheme.
• Financing the foreign trade of the country both Export and Import.
• Enhancing the mobilization of savings both from urban and rural area.

The prime objective of PBL is to deliver a quality that demonstrates a true reflection of their vision-Excellence in Banking. Improve the quality of lone and services, and diversify the sources of revenue.

• Focus on Current, Savings & Short Term Deposit Accounts to reverse the ratio (26:74) with Fixed Deposit Receipt.
• Take immediate action required to reverse the rise of Cost of Fund.
• Increase fee based income: increase volume & fee of Letter of Credit & Guarantee, increase export and exchange earnings.
• Reduce operating cost as minimum as possible.
• Encouraging green banking.

Premier Bank is committed to their corporate responsibility toward the community. They allocate 2% of their tax profit for CSR practices each year. They have also taken numerous initiatives towards social welfare and community development. They also donated-

• The Premier Bank Limited has distributed gifts-items among the Hajj pilgrim at Ashokona Hajj camp.
• Premier Bank is proud to patronize “Premier Bank Award” to Bangladesh National Women Cricket Team.
• Opening Ceremony of “Premier Bank Bangladesh Championship League 2011-2012 was held at Bangabandhu National Stadium, Dhaka.
• A Qawaly Concert was title sponsored by The Premier Bank Limited to celebrate glorious 400 years of Dhaka the Capital of Bangladesh.
• The Premier Bank Limited s proud to sponsor the prime gate of the International Trade fair 2011.
• Premier Bank organized a welcome program for the Business Community in Narayanganj.
• Premier Bank organized “Meet the HAAB Members” On the Holy Hajj 2011.
• A Workshop on “ACU Transaction and Activities” held at Premier Bank Training Institute.
• The Premier Bank has financed in textile industry.
• The Premier Bank extended a donation to the distressed spouse of a martyred army officer of the tragedy at BDR Headqurrters at Peelkhana, Dhaka.
• The Premier Bank Limited Came forward to sponsor “ Koren Cup Golf Tournament-2011”
• The Premier Bank Limited has arranged “Premier Bank Bangladesh Championship League 2011-2012.
• The Premier Bank Has supported for the treatment of the hard-up people.
• The Premier Bank has contributed for construction and renovation of Mosque and Madrasha.
• The Premier Bank Limited rewarding the Bangladesh Women Cricket Team.

Departments of Premier Bank Limited:

Premier Bank maintains the jobs in a proper and organized considering their interrelationship that are allocated in a particular department to control the system effectively. Different departments of PBL are as follows:

Human Resources Division:

Premier Bank Limited recognizes that a productive and motivated work force is a prerequisite to leadership with its customers, its shareholders and in the market it serves. Premier bank treats every employee with dignity and respect in a supportive environment of trust and openness where people of different backgrounds can reach their full potential.

The bank’s human resources policy emphasize on providing job satisfaction, growth opportunities, and due recognition of superior performance. A good working environment reflects and promotes a high level of loyalty and commitment from the employees. Realizing this Premier Bank limited has placed the utmost importance on continuous development of its human resources, identify the strength and weakness of the employee to assess the individual training needs, they are sent for training for self-development. To orient, enhance the banking knowledge of the employees Premier Bank Training Institute (PBTI) organizes both in-house and external training.

The major responsibilities of HR are as follows:

• Employee recruitment
• Posting
• Transfer
• Increment
• Established yearly performance bonus
• Provident fund
• Confirmation
• Training
• Travel policy
• Telephone policy

Personal banking Division:

The personal banking division deals with the consumer credit schemes such as the personal loan, car loan, education loan, tax loan, personal secured loan that are tailored to meet the demand of individual customers. The manager of PBL credit who approves and administers shall the activities heads this division. The approval officer mainly rejects or approves the credit requests. After being checked by the approval officer, the credit requests go to the processing officer for further processing of the application.

Treasury Division:

Their main job is to take decisions regarding purchase and sell of foreign Currency. The purpose of Treasury’s operations is to utilize the funds effectively and arrange funds at a lowest possible rate of interest, through maintaining effective relationship with other banks and following the Government rules and foreign exchange regulations

Information Technology Division:

This department gives the software and hardware supports to different departments of the bank. As Premier Bank is engaged in online banking, the role of IT is very crucial for the bank. This department is the most active department of PBL where employees always stand by to solve any problems in the system. The managers and executives of IT division work continuously to develop the total IT system of PBL so that it can be operated with ease, accuracy, and speed. Since its journey as commercial Bank in 1999 Premier Bank Limited has been laying great emphasis on the use of improved technology. It has gone to online operation system since 2003. The main software that PBL uses are:

• Flex cube
• PB cube
• SWIFT Manager
• Premier Bank Server
• Nikash
• UNIX
• Western Union
• Premier Bank Foreign Trade

Credit Division:

The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Credit Policy Committee is composed of the managing director, the general manager, the Chief Risk Officer and the assistant general manager responsible for credits. Committee meets every other week, evaluates the banks overall lending portfolio and determines principles and policies regarding portfolio management.

Operation Division:

This is an integral and vital part of the bank. The services department ensures smooth operation and functioning within and between all the departments of PBL. It also provides continuous support to the core banking activities of PBL. The Manager of Services heads the department who formulates and manages various critical issues of the services function of PBL. He is followed by a group of executives who are the heads of various subsidiary divisions that operate within the services department. The Services Department is considered as the backbone of all other departments.

Finance & Accounts Division:

This is considered as the most powerful department of PBL. It keeps tracks of each and every transaction made within PBL Bangladesh. It is headed by Manager of FCD who ensures that all the transactions are made according to rules and regulation of PBL group. Violation of such rules can bring serious consequences for the lawbreaker. The functions of FCD are briefly discussed below along with an organ gram of the department.

Audit & Risk Management Division:

The Risk Management Division is responsible for measuring risks that the Bank might face in the course of its operations, developing corporate risk management policies and ensuring that risks remain within the limits in which the Bank prefers to bear such risks in line with its own strategic targets and risk appetite. The primary goal of risk management is to provide capital to businesses in line with their risks (economic capital), maximize risk-adjusted return and increase the added value.

The risk management function consists of Market Risk, Credit Risk and Operational Risk Management Units. Bank Risk Committee, Asset-Liability Committee (ALCO), Credit Policy Committee, and Operational Risk Management Committee are the other risk management bodies.

During the 3^rd quarter of the year 2009 the Management of the Bank has set up a Separate Risk Management Unit (RMU) in line with Bangladeshi Bank directives. The RMU functions under direct supervision of the Managing Director, who is assigned by the Deputy Managing Director (Risk Management). The Risk Management Unit supervises and monitors independently and consistently the management of following Main Risks:

1. Credit Risk
2. Asset- Liability Risk
3. Foreign Exchange Risk
4. Internal Control & Compliance
5. Anti Money Laundering
6. Information and Communication Technology
7. Balance Sheet Risk
8. Operational Risk
9. Market Risk
10. Liquidity Risk
11. Reputational Risk
12. Insurance Risk
13. Sustainability Risk

The main purpose for establishing the RMU is to prevent the Bank from taking too much risk and build up a Capital Adequacy, which is more risk sensitive. The RMU tends to take necessary measures and find out strategy against financial crisis, unusual market condition, and different investment vulnerabilities.

Services of PBL:

Premier Bank Visa Credit Card

Our VISA International Credit Card is accepted globally and VISA Local Credit Card is accepted at more than 3500 outlets across the country. You will get free credit facility up to 45 days without any interest. You can draw cash up to 50% of the credit limit of local Visa Card. You can also pay only 5% of your billing amount every month. You may apply for supplementary Cards for any person over 18 years of age. If you lose your card, you just inform the Premier Bank Card Division without any delay and you will be protected against misuse of the Card. Rates and other facilities are highly competitive in the market.

You can rely on The Premier Bank VISA Credit Card and practical support 24 hours a day worldwide. Leaving you free to enjoy shopping, traveling and much more.

Islamic Banking System:

Islamic Banking system has now-a-days become a reality all over the world. It is widely accepted and liked not only by the Muslims but also Non Muslims. The Premier Bank Limited has launched Islamic Banking Operation through its two (2) branches:
In order to ensure smooth operation of Islamic Banking and proper guideline, the Bank has a Shariah Council consisting of renowned Scholars, Alem, Faqih, Lawyer, Islamic Banker and Philosopher. You can get Islamic Banking Services from any Branches of the Bank through “Islamic Banking Help Desk” as exist at every conventional Branch.
Investment Schemes of Islamic Banking Different Investment Schemes of our Islamic Banking Operation may be categorized under three basic parts. They are as follows:

Islamic Banking Operation

Islamic Banking system has now-a-days becomes a reality all over the world. It is widely accepted and liked not only by the Muslims but also Non Muslims. The Premier Bank Limited has launched Islamic Banking Operation through its two (2) branches:

1. Islamic Banking Branch, Mohakhali, Dhaka.
2. Islamic Banking Branch, Laldighirpar, Sylhet.

In order to ensure smooth operation of Islamic Banking and proper guideline, the Bank has a Shariah Council consisting of renowned Scholars, Alem, Faqih, Lawyer, Islamic Banker and Philosopher. You can get Islamic Banking Services from any Branches of the Bank through “Islamic Banking Help Desk” as exist at every conventional Branch.

Deposit Products of Islamic Banking

• Al-Wadiah Current Account
• Mudaraba Savings Account (MSA)
• Mudaraba Term Deposit Receipt (MTDR)
• Mudaraba Special Notice Deposit Account (MSNDA)
• Mudaraba Premier 50+ Account
• Mudaraba Premier Genius Account
• Mudaraba Monthly Savings Scheme (MMSS)
• Mudaraba Monthly Income Scheme (MMIS)
• Mudaraba Education Savings Scheme (MESS)
• Mudaraba Special Deposit Scheme (MSDS)
• Mudaraba Double Benefit Scheme (MDBS)
• Mudaraba Hajj Saving Scheme (MHSS)

 Note: The benefit amount from these deposit products can vary depending on the overall Profit/Loss and the weightage.

Investment Schemes of Islamic Banking Different Investment Schemes of our Islamic Banking Operation may be categorized under three basic parts. They are as follows:

Buying-Selling Mode

(a) Bai Murabaha (Sale in cash or differently),

(b) Bai Muajjal (Sale under deferred payment),

(c) Bai Salam (Advance Purchase),

(d) Bai Istisna (Progressive Financing)

Sharing Mode

(a) Murabaha (Sharing),

(b) Musharaka (Partnership)

Leasing or Ijara

(a) Leasing where the leaser (Bank) retains ownership of the assets and the lessee (client) possesses the right to use the assets on payment of specified rent over a period.

(b) Hire-purchase under Shirkat Al-Mielk: Under this system, the bank finances to purchase the machineries, equipments, consumers’ durables etc. under a joint ownership agreement subject to ownership ratio as per equity.

Following Investment products are conducted under the Islamic Banking System:

Consumer Investment Scheme

Housing Investment/Apartment Finance
• Doctors’ Investment Scheme
• Rural Investment Scheme
• SME Investment
• Women Entrepreneur Investment Scheme
• Lease Finance
• Project Finance

• Student’s Investment Scheme

Others Product of PBL:

Evening Banking Service:

A unique service of The Premier Bank Limited for receiving cash and documents beyond transaction hours till 8 o’ clock in the evening. This service is attractive for those like shopkeepers who accumulate cash as sales proceeds in the afternoon when counters of Bank Branches usually remain closed. The service is available at selective branches of our Bank.

Remittance  Service:

Our Remittance Payment procedure is very safe, simple and fast. The Bank has signed a good number of long term deals with a group of well-connected remittance partners across the globe such as MoneyGram, Dolex and Xpress Money Services etc. We have developed our own remittance distribution software “DRUTI”. In addition to our 58 branches, we have agreement with GrameenPhone (1,40,000 outlets), Jagarani Chakra Foundation (250 outlets) and General Post Office – GPO (10,000 outlets) to use their mobile technology and wide distribution outlets around the country to easily distribute inward remittance. With a view to channeling the homebound foreign remittances from Bangladeshi expatriates, the Bank has decided to open 100% owned subsidiary Exchange Company of Premier Bank in Italy, Libya, Malaysia, Singapore, Spain and UK subject to approval from Regulatory Authorities of the respective Countries. Permission from UK has already been received and the rest are underway.

SME Service Centre :

In order to facilitate the investors of Small and Medium Enterprise, Premier bank has opened several SME Service Centres at different locations – Banani SME Centre – Plot No. 76/A (1st Floor), Road No. 11, Banani, Dhaka. Bangla Bazar SME Centre – 42, Bangla Bazar, Ward No. 73, Sutrapur, Shadarghat, Dhaka. Kawran Bazar SME Centre – Progoti RPR Centre, 20-21, Kawran Bazar, Dhaka. Tel; 8189404. Mohammadpur SME Centre – 1/4, Block E, Shat Masjit Road, Mohammadpur Bus Stand, Ward No. 46, Dhaka. Tel: 9101929. Malibagh SME Centre – 98, Shiddeswari Circular Road, 1st Floor, Mouchak More, Malibagh, Dhaka.

About the Premier TC

“Premier TC” is prepaid foreign currency card denominated in US dollar available over the counter of the branches that makes your foreign trip totally hassle-free and convenient. You can load this prepaid card with foreign currency in Bangladesh which gives you a 24-hour access to your money. With “Premier TC” you can attend to your business, enjoy the delightful tourist spots, dine out, and take in the breathtaking landscape and exotic culture of the country without worrying about money changers and converting your traveler’s cheques into local currency.

SMS Banking Service :

Check your Bank Account Balance, while you are stuck in traffic. Stop Cheque Payment from the airport. Request for your Account Statement while watching TV. Check Last Three Transactions of your account at the restaurant. All these and more are possible through our SMS Banking Service.

VISA card:

This card can be used to withdraw cash in the local currency from over 1 million VISA ATMs and shop at over27 million merchant establishments accepting VISA Flag cards from the country they are traveling to. The card is sold from Premier Bank branches and Card Division.

Premier Bank Debit Card

We are offering Premier VISA Debit Card Service as well as own Automated Teller Machine (ATM) facility to electronically debit money from your account. In addition to our own ATM Booth, you can also use Premier VISA Debit Card in other Bank ATM where VISA Card is accepted.

About us:

The Premier Bank Limited is a Corporate Member of Dhaka Stock Exchange (DSE) & Chittagong Stock Exchange (CSE) under Membership # 236 and respectively # 143. The Bank has started its Brokerage operation on 01 December 2009. We have already opened near about 950. BO accounts (Beneficiary Owners Account) in our Brokerage House. The operation is going on with full satisfaction of the clients. We will also turn into a Subsidiary Company within a very short time. The name of the subsidiary company will be “Premier Bank Securities Ltd”.

International Services:

Advance Payment Bonds for infrastructure projects in Bangladesh, participating in tenders The International Division is looking after Correspondent Banking Relationships, Treasury Back Office and International Trade Settlement. In order to smooth global operation of international business we have correspondent banking relationship with 430 foreign banks around the globe and maintain 19 Nostro accounts in 9 currencies to service our customers. Bank is providing the facility of Letters of Credit, handling of Import Bills, issue of Shipping Guarantees, acceptance of Bills, financing of Imports. Advising of Export Letters of Credit, Confirmation of Letters of Credit, Assistance in preparation of Export documents, Negotiation of Letters of Credit, Handling Export bills on Collections, Purchase/Discount of Export bills, Pre-shipment facilities are extended for both domestic and foreign trade. The requirement of letters of guarantee, Bid Bonds, Performance Bondsor any other need basis, could be channeled through us for speedy delivery at competitive tariffs.

Call Center:

We have setup our own “Call Center” at Head Office under the direct supervision of the Managing Director. If you have any queries, suggestion or complain, you can talk to our Call Canter during business hour. You will also find complain/suggestion box at our every branches for your valuable input. Our Call Center is open from Sunday to Thursday to accept your call in working hours from 10:00 a.m. to 6:00 p.m. except on Saturday from 10:00 p.m. to 3:00 p.m. Dialing numbers are: 02-9887581-4.

Policies and Practices of Credit Management in Premier Bank Limited

Introduction

The loan and credit department is a very important department of a bank. The money mobilized from ultimate surplus units are allocated through this department to the ultimate deficit unit (borrower).the success of this department keeps a great influence over the profit of a bank. Failure of this department may lead the bank to huge losses or even to bankruptcy. Loan and credit department receive application from client in a prescribed application form supplied by the Premier Bank Limited, Comilla branch.

The Bank implemented the system of credit risk assessment and lending procedures by stricter separation of responsibilities between risk assessment, lending decisions and monitoring functions to improve the quality and soundness of loan portfolio. The Bank recorded a 6% growth in advances with a total loans and advances portfolio of BDT 49774.91 million at the end of December 2011 compared to BDT 46400.57 million at the end of December 2010.

As of 31 December 2011, Most of the Bank’s loan portfolio was regular while only a few of the total portfolio was non- performing as compared to 2010. Bank made required provision as of 31 December against performing and non- performing loans as per rate and classification norm provided by Bangladesh Bank. The volume of non- performing loans stood at BDT 3374.33 million in 2011 from 2010.

Credit Rating Report

Premier Bank Limited was rated by Credit Rating Agency of Bangladesh (CRAB) on the basis of audited financial statements as on December 31, 2012. The Summary of the Ratings is as follows

Commercial Banks rated A1 in the long term are strong banks backed up by good financials and timely payments of financial commitments. ST-2 in the short term for commercial bank characterizes commendable position in terms of liquidity, internal fund generation and timely repayments

Functions of the Credit Department

Lending money is one of the main functions of a commercial bank. In the lending process, selection of borrower is the most crucial and vital job for a banker. Before a customer enjoys credit facilities it is important that the applicant should qualify for five Cs. The five Cs are:

• Character – Intention to pay back the loan
• Capacity – Borrower’s competence in terms of utilizing the fund profitably and generate income
• Capital –Financial strength to cover the risk
• Conditions – General business condition between two parties
• Collateral – Implies additional securities

In addition, objectives of the credit department are managing credit exposure of the bank, maintaining credit risk, compliance of Central Bank Ltd, recovering or collecting dues of retail loans or advances. At present credit division performs following activities:

• Credit Approval Process:
• Corporate Credit
• Retail Credit
• Collection and Monitoring Activity:
• Recovery
• Risk management

The activities of this department include managing the financial books of the bank, checking all entries of the book are according to standards, preparing daily reports for Bangladesh Bank, revenue appropriation and calculations, setting the internal pricing rates etc.

Loan is an asset to any financial institution. That is why it is very much necessary to ensure that a loan does not become bad. The first step in ensuring that is to ask for proper documentation of the loan applicant. A default loan might be very hard to recover due to lack of proper charge documents. This is where the asset operation department of the bank comes into action. Asset operation department of the bank acts as a last frontier to mitigate all loan related risks before disbursement of a loan.

The functions of asset operation department can be broadly categorized under two heads. The first one is the disbursement and monitoring of loans. In this case the department disburses loans after obtaining clean CIB reports of the clients, checking all documents and collecting securities after proper lien and charges creation after terms of approval. This department also periodically review conditions of past due loans, limit, expiry and document deficiency.

The next operation of the department is to act as custodian and compliance of the charge documents and prepare various MIS reports for the central bank and other audit authorities.

Overall Credit Policy of PBL

Lending being the most important function of commercial bank, every bank should have own credit policy. Credit policy generally aims at (a) creating healthy loan assets to ensure goods interest earning for the bank (b) ensuring ultimate safety through judicious selection of based on its salability.

Selection of based on its salability.

The credit policy of Premier Bank Limited has been formulated of the plan of “ALL NEW LOANS TO BE GOOD LOANS”, The plan was formed on the basis of the following objectives:

• To maximize the profit of the bank by making sound lending
• To deliver credit to viable borrowing at a reasonable cost
• To provide satisfactory return on investment
• To assist the social and economic development of the country
• To deliver general banking services to the public and credit to viable borrowers at a reasonable cost.

Know Your Customer:

The success of a bank and the consistency of its profits depend on the efficiency and safety with which it makes use of its resources- Capital and deposits by lending those resources to various types of borrowers.

Selection of customer is important; therefore the first criterion should be “Know Your Customer”.

The major factor in successful lending is ability to judge the Character and Credit-worthiness of the borrower.

1. Credit worthiness can be judged on certain general principles, which we should follow in the decision making
2. The integrity of the borrower: – He should be a respectable and honorable man who can be relied on to keep his promises.
3. The ability to repay the advance: – This ability will depend on his financial resources, which is meant not only his income but also the property or capital that he possess or will possess.
4. The purpose for which the advance is required: – The bank should ensure that the purpose of the loan is such as to make the advance suitable as a matter of banking business.
5. The source of repayment of the advance: – We should ensure that the product which the borrower has been manufacturing/dealing with has a good demand in the market.
6. The period for which the advance is required: – An advance to a manufacturer to enable him to buy raw materials to fulfill a profitable short-term contract is an advance of temporary character promising sound banking business.
7. Past dealing with the customer may give us a lead to the customers’ character and trustworthiness, and personal knowledge of the man may confirm any opinion the branch may have formed from the working of an existing account.

The branch will also consider the customers’ local standing, the influence he may be able to exert (e.g. by introducing new customers), and whether he has been a good friend to the bank in the past.

Traders or industrialists who require advances for purpose of their business usually have some assets. When advancing to trading customers, therefore, the branch should ask for Balance Sheet and Statements of Income & Expenditure for the previous 2/3 years so that the branch can form an opinion of the value of the customers’ assets and liabilities, and may obtain a true perspective of the trend of the customers’/ borrowers’ affairs.

While meeting an existing / potential customer the officer of the branch must check whether the person with whom he will be dealing with i.e. proprietors/partners/directors are extravagant in personal life style? Living beyond his means? And resort to irregular behavior leading to evasive answers?  To enable him form an opinion of their relationship with us. While considering the business of an individual / entity the branch will value each asset on a forced sale basis.

The bank will not grant loans for purely speculative purposes.

1. A business having negative net-worth should not be granted any credit facility if are not covered by cash/quasi cash securities with adequate margin.
2. Always refer to Account opening form at the initial stage of your dealings with the customers to establish the identity of the borrower.
3. If the customer is a Public figure the account will be considered a High Risk Account.
4. When opening accounts, the concerned officer must assess the risk that the accounts could be used for “money laundering” and must classify the accounts as either High Risk or Low Risk.
5. Please get yourself acquainted with, ‘ANTI MONEY LAUNDERING PROCESSES’- prepared by Focus Group on Prevention Money Laundering.

(Reference: MANAGING CORE RISKS IN BANKING GUIDANCE NOTES ON PREVENTION OF MONEY LAUNDERING – prepared by Focus Group for Bangladesh Bank.).

We must establish to our satisfaction that we are dealing with a real person (natural, corporate or legal) and must verify the identity of persons who are authorized to operate any bank or investment, or transact business for the customer.

We suggest an officer of this bank while meeting / discussing with a customer will prepare a file note of the contents of discussion for future reference which may disclose changes of address, telephone number and so on for incorporation/substitution in the AOF and other records.

Customer Segmentation

Management of credit by segment wise approach is considered effective in the sense that an officer who requires managing in one particular segment gains experience by handling same type of borrowers. And in the course of handling he can expand his experience towards managing and administrating an increased number of accounts with accuracy and confidence.

But an officer having number of accounts in various segments, with size and complexity will be constraint to give equitable attention to his job and judgment.

More over the segment market approach will create a sense of competition amongst the team members of different segments, which will effectively work towards achieving our annual target for deposit and advance, and a better credit administrative function.

The customer segmentation will be as under: –

1. Personal segment
2. Foreign government segment
3. Public sector segment
4. Multinational segment
5. Local corporate segment
6. Others i.e. who does not fall in the above segments

The basic job of our Account officer/Business relationship officer/manager is to manage his risk asset portfolio which, in short, includes appraisal, preparation of sanction advice, documentation, regular follow up, review of the account including restructuring/rescheduling, preparation of periodical return, recovery process etc.

Discouraged Business Types

The Bank will not grant any facilities to the following Business Types:

1. Bridge Loans relying on equity / debt issuance as a source of repayment;
2. Counter parties in countries subject to UN sanctions;
3. Finance of speculative investments;
4. Finance of Military Equipment/Weapons;
5. Highly leveraged Transactions;
6. Lending to Holding Companies;
7. Lending to slow moving items;
8. Logging, Mineral Extraction/Mining, or other activity that is Ethically or Environmentally Sensitive;
9. Lending to companies listed by CIB (Central Bank i.e. Bangladesh Bank’s Credit Information Bureau) as defaulters or known defaulters / habitual defaulters;
10. Highly perishable goods stored in godown;
11. Share lending;
12. Taking an Equity stake in Borrowers etc.

We should not grant facilities where our security position is inferior to that of any other financial institution and that: –

• Assets pledged / Hypothecated as security should be properly insured.
• Valuation of property taken as security should be conducted prior to granting of loan by a recognized independent valuation firm.

Cross Border Risk

Risk associated with cross border lending. Borrowers of a particular country may be unable or unwillingly to fulfill principle and / or interest obligations. Distinguished from ordinary credit risk because the difficulty arises from a political event, such as: –

1. Suspension of external payments.
2. Synonymous with Political & sovereign risk.
3. Third world debt crisis, for example, export documents negotiated for countries like Nigeria.

Exceptions can only be granted by the Board.

As general guideline companies forming our targets should have the following criteria:-

1. Our targets should normally be the top companies and business firms of Bangladesh with a good track record.
2. Included in the track record will be annual net worth increase over the past three years.
3. We should look for a debt / worth relation of 2:1 to maximum 3:1.
4. A minimum current ratio 1:1.

Exceptions:

Borrowing covered at least by 100% of credit balance i.e. Fixed Deposit / Saving Bank balance/ margin etc. in the name of the borrower or guarantor.

1. The borrowers’ integrity and market report must be beyond any question.
2. Satisfactory CIB /bank report required.
3. Proprietor / partners /directors must have experience in business.
4. Where audited accounts are not available actual financials in proper Statements of Income & Expenditure and Balance Sheet form for three years of which the latest one must not be older than three months from the date of submission of proposal should be made available to the bank.
5. Minimum after tax profit/ sales margin 5%.
6. Annual sales growth must not be less than 10%.
7. Minimum annual Net profit from each customer Tk. 2.00 Lac with minimum ROA 3%.

Insurance: In joint names for full value of security plus 10% against FIRE, RSD, Burglary, Earth quake, flood, cyclone, Tempest. (Exemption will be considered on case-to-case basis).

Covenants and Conditions: Only those commodities, which are essential consumer items and basic raw materials of the industries having good marketability in short supply, should be financed. Duty, sales tax and other landing charges to be borne by the borrowers’ own sources.

Proforma for Personal Wealth Statement:

Which of the above assets are encumbered with whom and for what value?

Connection of proprietor /partner/director with any other business concerns. Provide names of such concerns and percentage of ownership / shares.

Risk Asset Management (RAM):

Purpose: Effective Risk Asset planning and administration.

Objective: Containment of credit losses. Improve profitability of the Bank.

Definition of ‘Risk Asset’: Risk assets for the purpose of RAM include contingent liabilities such as letters of credit and guarantees also. These contingent liabilities must be treated from a credit approval point of view as having the same credit exposure as funds based assets.

Steps in RAM Process:

Planning :

Target market criteria – to define desired customer base.

Note:  Strategy as to desired customer base; consider risk inherent in each market; criteria to     define characteristics of an acceptable customer. Understanding of each market-which one shows prospects of growth/ profitability ?

Terms of Acceptance of Risk Assets – to define terms of our products (to target customers).

Note:   Define terms for our products/services to be offered, to produce desired profitability at acceptable risk. Ancillary business?

Care!   Higher earning prospect cannot justify a bad loan.

Initiation :

1. Client / Prospect Check Vs Criteria.
2. Evaluation of his needs (know his business and his environment).

Note:   Bear in mind funds availability; Plan your call. Perhaps you could use visit for a pre‑sanction inspection. Do Call Memo. Account Plan.

• Negotiation: ‑ Terms ‑ Bear in mind customer situation; also the agreed terms of acceptance for the target market.

Approval: Compliance with internal credit approval procedure.

Note:   Facility application package i.e., Credit Memo with full background/financial information, analysis of historical trend, prospects, anticipated profitability vis-à-vis funds based, non‑funds and/or exchange business expected. Any exceptions must be listed for approval by appropriate authority.

Documentation & Disbursement:

Identify particular documents required for each facility and arrange completion. Enlist outside legal assistance where necessary. e.g. when drawing up special consortium / term loan agreements etc.

Appraise value of security offered vis-à-vis Bank’s needs.

N.B.: –

1. Go through the various items of documentation requiring to be certified in the credit Memo and ensure full completion.
2. Do not disburse until all required documentation is correctly completed. Any exception to this rule must be referred to sanctioning authority.

Administration :

Administration is a continuous process. Effective administration requires a constant and systematic review of the account and client activity.

1. Close monitoring of account.
2. Keep abreast with client, his current activity, and expansion/diversification plans etc.
3. Adherence to security requirements.
4. Updating documentation, as required.

N.B.: –

1. Be alert to identify any deterioration in the credit.
2. Look for warning signals for early corrective action.

Consider down grading, the aim being to highlight risk areas and the need for closer monitoring and control.

1. Plan remedial action in consultation with controlling authority.
2. Remedial Management; work‑out; restructure of debt.

A detailed procedure regarding Credit discipline may be based on the following lines:

a) Request for application for facilities in banks printed form;

b) Examine the nature of facility required;

c) Acknowledge if it merits consideration /reject if the business does not suit us/meets our credit policy requirement / Bangladesh Bank credit restriction.

a) Refer to the liquidity position while considering the facility;

b) Consider high yielding, short term, and self-liquidating advances with ancillary business/compensating deposit;

c) Prefer quality advances;

d) Obtain/prepare credit report on the customer/update the report at least quarterly basis (Banks’ opinion/CIB reports).

Restrictions on Loans & Advances

Our Bank will not make or commit any facilities to an entity or a number of entities under the ownership of one customer, which exceeds 50% (Fund based 25% & Non fund based 25%) of the capital fund of the bank without obtaining Bangladesh Bank approval.

Similarly our Bank will not make or commit any unsecured and/ or secured facilities to the own Bank Director(s) or his /their dependants exceeding 50% of the shares hold by any Directors subject to a maximum amount of Taka One million without the approval of the Bank’s Board of Directors and Bangladesh Bank.

Clearance of Bangladesh Bank, Credit Information Bureau (CIB) is required for granting Credit facility of any amount in order to ascertain that the prospective borrower has no classified loan with other Bank(s).

Our Bank will not grant any facility to a customer having default loans outstanding with another bank.

Our Bank will not grant Loans/Advances against security of its own shares.

Our Bank will not grant advances to a minor or a company where a minor is holding the majority share.

Our Bank will not make loans against second mortgage of properties whose value is equal and secured by 1^st mortgage.

Our Bank will not make advances / loans to enable the borrower to speculate in shares and debenture and / or commodities for hoarding purposes.

Our Bank will not make advances against properties in locations where we do not have a branch.

Our Bank will not grant loans against accommodation bills.

Our Bank will not issue a guarantee of any type whose expiry is beyond three years without having 100% margin.

Policy for Taking over Loan from other Bank

During normal course of Banking, we take over loans from other Banks. While taking over loans may be necessary and rewarding in a competitive environment, we have to be very cautious that the loan which we are going to take over is a good and remunerative one.

The following policy guidelines shall be followed for taking over loans:

1. We shall not take over any loan, which is running overdue with their existing Bank.
2. We shall not take over any loan which has been rescheduled in any Bank.
3. We shall not take over any loan of a company/firm/individual who has classified liability in its name or in the name of its sister/allied concern(s) with any Bank.
4. We shall not take over the loan of any sector which has vulnerable future and whose market may face difficulty due to anticipated change of international as well as domestic policy.
5. While processing credit proposals which involves taking over of loans from other Banks, we must collect a copy of the latest sanction letter, copies of statement of accounts, and review the existing terms and conditions.
6. Generally, we shall not give credit facilities at terms and conditions which are inferior to those of their existing lender. Any exception shall be fully justified in the credit proposals.
7. We should encourage the customers to repay the liabilities with their existing Bankers from their own resources, obtain release of securities/collateral etc and then borrow from our Bank by pledging the necessary securities/collateral.
8. Where we have to take over securities/collaterals from Banks and repay the liabilities of the customers by creating loans in our Books, we must, after due sanction of the limits, follow the under noted procedure:
9. The customer shall write a letter addressed to their existing Banker giving clear instructions to deliver all the documents relating to mortgaged property and other securities to the authorized representative of The Premier Bank Limited on adjustment of their liabilities. A copy of the letter shall be endorsed to us.
10. The Branch, which is going to take over the loan, will write a letter to the existing Banker of the customer to confirm the outstanding liability position of the customer with them and the particulars of the mortgage/securities held with them. The Branch will also ask for the consent of the existing Banker of the customer to deliver the property documents and other securities to us relating to the loans to the authorized representative of our Bank upon adjustment of liabilities. Existing Bank shall also execute redemption deed for the mortgaged property as per draft approved by our lawyer.
11. On getting consent in writing from the existing Banker of the customer, our Branch must obtain all charge documents from the customers along with authority to us to create loan for the amount and issue Pay Order within the sanctioned limit for adjustment of the liability of the customer.
12. If our Bank decides to take over contingent liabilities of the customer, the Branch may issue Guarantee to the existing banker covering the contingent liabilities. The form of the Guarantee must be approved from Head Office.

Counter Guarantee must be obtained from the customer (backed by Board’s Resolution where necessary) for timely settlement of the contingent liabilities. Post-dated cheque(s) shall be obtained from the customer.

The customer shall pay commission to the Bank for the Bank Guarantee(s) to be issued by us for taking over non-funded liability.

The customer must undertake in writing to the effect that he/she shall arrange redemption of the mortgaged property with his existing Banker immediately after adjustment of the liability with his/her existing Banker by us and arrange with the Bank for handing over original title deeds and other chain of documents/papers relating to the property as well as other security and documents to the authorized representative of The Premier Bank Limited for creation of Mortgage/Charges in favor of our Bank.

The Branch must obtain Note of Satisfaction of Charges from the existing Banker and file for Registration of First Charges with the Registrar of Joint Stock Companies and Firms. All relevant forms regarding creation of charges (RJSC Form No. XVIII, etc) should be completed and got signed by the borrower before creating any loan.

All charge documents including Memorandum of Deposit of Title Deeds to be obtained duly signed by the customer /mortgagor before issuance of Pay Order/Bank Guarantee. Registered Mortgage must be completed immediately on receipt of original Title Deeds from the existing Banker of the customer.

An undertaking to be obtained from the customer(s) on Non-judicial Stamp to the effect that they will adjust liabilities from their own sources on demand to The Premier Bank Limited if their existing Banker does not redeem mortgages/release securities. The draft of the undertaking shall be vetted by our Lawyer.

Prior to creation any loan and payment to the existing bank, the customer shall give photocopy of all mortgaged deeds and sign in advance the proposed Registered Mortgage Deed keeping the date in blank, which may be registered later on getting original documents from existing banker and also NOC from RAJUK, if necessary. Application for NOC from RAJUK or any other authorities required for creating Registered Mortgage should be obtained before creation of loan. Only after Registered Mortgage is created and all legal and banking documentation (charge documents) are obtained, the Branch will allow the borrower to avail the remaining facilities.

Policy of Small & Medium Enterprise (SME) Scheme

Background:

Bangladesh is a high densely populated and one of the poorest countries of the world. Per capita income of our country is $ 385 (app). Job opportunity is very scanty. Unemployment rate is approximately 45% and population below poverty line is 36%. So, it is a prime issue for the nation to generate income through creation of job opportunity & employment. It is not easy to create job opportunity at large scale. As a financial institution, we can increase self-employment through financial support.

There are many small and medium entrepreneurs in our country who have innovative ideas, spirit and potentiality to do something productive for local consumers as well as export abroad. They can generate income and contribute to the GDP. They may also provide employment to other people. Development and growth of Small and Medium Enterprises is playing a vital role in the National Development. Such type of entrepreneurs cannot go a long way for want of financial support because they have no access to institutional credit facilities, as they cannot provide collateral security as demanded for such credit facility.

The entrepreneurs who have no scope to avail any credit facility from formal financial institutions they are bound to take credit facility for maintaining their entrepreneurship from non-formal institutions/individuals with high rate to continue their effort.

The Premier Bank Limited is committed to play positive role in the socio-economic development of the country. So, we can introduce Small & Medium Enterprise (SME) Credit Scheme to contribute our effort in the socio-economic development of our country.

Credit Scheme for Small and medium Enterprises is very popular in most of the developed and developing countries of the world. If we look at south East Asia, China, Taiwan, Hong Kong, South Korea etc, we will find that small and medium businesses are the real engine of growth in those countries. 50% of United States exports are created by companies with 19 (nineteen) or fewer employees. The global economy of the 21^st century will be dominated by Small and Medium sized players.

Policy of Credit Facility secured by Deposit/Cash Collateral (SOD)

Terms & Conditions:

1. The Credit facility must be 100% covered by Deposit in our Bank under lien. 10% margin shall be retained in respect of funded facility i.e. Loans & Advances shall not exceed 90% of the deposits. In case of non-funded facility such as L/C or B/G, 100% exposure may be taken.
2. Interest differential between the Loans & Advances and deposits held with our Bank shall be 3% P.A.
3. Commission / Charges for non-funded facility may be reduced by 25%.
4. Proper Letter of Lien and other charge documents shall be obtained. In case the deposits are held in the name of the Third Party, Personal Guarantee of the Depositor will be obtained.

Credit Policy Exception

Policy exceptions are required when:

1. The overall amount of credit in any one name or group exceeds 50% (Fund based 25% + Non fund based 25%) of our bank’s capital resources.
2. Entering in to under writing commitments; (other than syndicated loans).
3. Financing arms or other military equipment.
4. Extending credit direct to a holding company or based on the guarantee of a holding company that does not have substantial operating assets and revenues from diversified sources.
5. We are in an inferior position as compared to other bank lenders with comparable facilities.
6. Final payment date for commercial loans is over five years from date of customers’ acceptance of commitment.
7. Term loan commitments expire beyond six months from the date of credit approval.
8. The first amortizing payment for commercial loans occurs later than twelve months from the date of the final draw down.
9. Total amortizing payments for commercial loans during the final year exceed 30% of the original amount of the loan.

Types of Loans and Advances

When an advance is made in a lump-sum repayable either in fixed monthly installments or in lump-sum and no subsequent debit is ordinarily allowed except by way in interest and incidental charges etc. is called a loan.

Loan is allowed fir a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span.

After disbursement of the entire loan amount, there will be only repayment by the borrower. A loan once repaid in fill or in part, cannot be drawn again by the borrower.

• Personal Loan
• Car Loan
• Vacation Loan
• Home Loan
• Any Purpose Loan

(Described in details in the previous part)

• Overdraft
• Import Financing
• Export Financing
• Bank Guarantee

O.D. Against pledge of goods:

Overdraft facilities may be provided to the borrowers against pledge of raw materials or finished goods as security. In this matter the borrower surrenders the physical possession of the goods, under effective control of the bank. The ownership of the goods however, remains with the borrower. In case of default by the borrower in repayment, in the credit the bank has the authority to sell the pledged goods and realize the due loan with interest.

But the bank has to give a notice to the borrower before attempting to sell the goods. The following thing must be considered while allowing O.D. facilities against pledge of goods or stocks

• The quality and quantity of the goods,
• The goods are readily sellable and have a stable demand in the market,
• The borrower has an absolute title to the goods,
• Goods must be checked regularly by the authorized representative of the bank,
• The lack of the go-down is to be sealed and keys are to be kept in the branch.

Loans against Imported Merchandise (LIM):

Loan against the merchandise imported through bank maybe allowed pledge of goods retaining margin prescribed on their landed cost. The branch shall also obtain letter of undertaking and indemnity from the customer before getting goods cleared through L.I.M. account. Clearing should be taken by approved clearing agent of the bank. Merchandise should be insured with specific risk clauses.

The following matters must consider while allowing L.I.M. against secured of goods. The landed cost of the merchandise is measured before the goods are delivered the client against proportionate payments. The landed cost is determined by taking following items:

• Invoice value if the merchandise including freight
• Customs duty
• Sales tax
• Warfare
• Derange agent’s charges
• Railway freight
• Insurance premium
• Other charges

Loans against Trust Receipt (LTR)

Advances against a Trust receipt obtained from the clients are allowed when the documents covering an import shipment are given without prior payment. This type of facility is given only to first class and reliable clients.

The customer holds the goods or their sale proceeds in trust for the bank till the loan allowed against Trust Receipt is fully paid off.

The Trust receipt is a document which creates the banker’s lien on goods and practically amounts to hypothecation of the proceeds of sale in discharge of lien. The period of Trust receipt may be 30, 45, 60, 90 days. The loan is adjustable within the period. Sale proceeds of goods held in trust must be deposited in the bank by the borrower irrespective of the period of the trust receipt.

Export Financing

Export finance can be allowed in two types or stages, namely-

Pre-shipment;

Packing credit

Back to Back L/C.

Post- shipment.

Through negotiation of documents;

Through purchase of foreign bill.

Packing credit:

Packing credit is a short-term credit granted by a bank to exporter to help him to purchase, process, pack and ship the goods. Generally, for the movement of goods from hinterland areas to the port of shipment, the bank provided interim facilities by way of packing credit.

Back to back

It is nothing but a secondary letter of credit by the advising bank in favor of a domestic/foreign supplier on behalf of the beneficiary of original foreign L/C.

Negotiation of documents:

Negotiation of documents under letter of credit is the usual method of financing exports at the port shipment stage. In this system, after the shipment of goods the export presents the relative documents to the Negotiating bank for negotiation. Normally, an exporter is required to submit following documents drawn in terms of the credit to the bank for negotiation of the bills:

• Bill of exchange or draft
• Bill of fading/Airway Bill
• Invoice
• Packing list
• Certificate of origin
• Insurance policy
• Inspection certificate
• Shipping advice
• Other documents as per terms of Letter of Credit.

Purchase of export bill:

The second and one of the most widely used methods of bank finance in export trade is the purchase of an export bill at the post shipment stage. Here the bank extends financial accommodation to the concerned exporter by allowing him to enjoy F.B.P (Foreign Bill Purchase) limit with prior approval of Head office, where necessary. The bank allows the export taka equivalent of the foreign bill amount after deducting its discount, commission and charges as per existing rule.

Bank Guarante

Bank guarantee is nothing but giving a guarantee (commitment) to a certain organization by a bank on behalf of its client stating that if the client of the bank fails to perform certain contractual obligation, the bank will settle the liability of the client to that organization (beneficiary). Commission is realized from the bank’s client for issuing such guarantee.

Bank guarantee is of two types:

• Bid Bond Guarantee,
• Performance Guarantee.

Bid Bond Guarantee:

Bid Bond Guarantee is issued by the bank on behalf of banks client favoring the beneficiary (the company which has request the bids) for the purpose of submitting Tender schedule by the client.

Performance Guarantee:

When a company (client of the bank) is awarded a contract, then the company (beneficiary of bank guarantee) who awarded the contract will request the contractor

Impaired Asset Management Department

This department of the bank looks after the default loans and tries to recover them. It is said that the less job load this department has, the better it is for the bank itself. The head of IAM directly reports to the Managing Director of the Bank and this division is an administrative division of the bank. This department of the bank has two wings. One wing looks after the impaired assets of SME wing and another wing looks after the impaired assets of retail business. Normally if a loan installment is six months overdue, then the credit department hands over the file to IAM for recovery. IAM first issues a letter in soft language. Then if it does not work, IAM issues further three letters to the defaulter. If it does not work either, then IAM files a case against the defaulter. Usually this case filing is done in the 11 month of the default.

Loan Admin – The posting is done in the system in the Asset Operations Department. Then Loan Admin sends requisition to Fin Admin.

Fin Admin: Fin Admin take care of the other expenses.

Recovery: Recovery Dept. prepares an overdue report and informs the TM. Recovery dept. keeps track of the money. Legal notices are given to the defaulters.

MIS: MIS dept. keeps the total record of loan from its sanction to repayment.

 Credit assessment

The evaluation process is carried out based on ‘Lending Guideline’ described in this Policy and the clauses and documents checklist as per the PPG. The detailed credit risk assessment should be conducted prior to the approving of any loans. The Credit Risks are detailed in the Risk Management Chapter of this policy.

 Risk grading

Bank shall formulate a separate risk-grading matrix customized for SME financing on the basis of expert opinion taking into consideration the experience of the Bank in lending the SMEs for last few years.

 Reporting to business unit

A monthly summary of all new loans approved, renewed, enhanced, and a list of proposals declined stating reasons thereof shall be reported by Credit Team to the Business Head.

CIB Obtaining Process

CIB is a regulatory requirement for Loan Documentation. Credit Information Bureau (CIB) of Bangladesh bank has a central database for all the lenders of Bangladesh. It contains the total credit history of a client and act as the most dependable source to analyze the credit worthiness of a prospective client. Obtaining the CIB clearance is a

To obtain a CIB report, AOD fills up the following Bangladesh bank prescribed forms for each loan application:

Inquiry Form: CIB – 1A: For each individual/ institution

Inquiry Form: CIB – 2A: Owner information if borrower is institution

Inquiry Form: CIB – 3A: Group/ related business information of borrower

CIB Undertaking form “KA”: For each individual/proprietor/director/partner

These forms are filled up by the business units and sent to the CIB segment of AOD. CIB segment maintains a central database for all the CIB inquiry forms. Each form is registered under a Head Office serial number and a Branch/ Unit office serial number. Therefore AOD prepares a forwarding letter with reference to 20 such inquiry forms, and sent them to Credit Information Bureau of BB once in a day. Usually the CIB reports are Sceived within 7-10 working days.

After receiving the reports from BB, AOD prepares a summary of the report and put that as reference in the loan file along with the photocopy of the CIB inquiry forms, undertaking and copy of the original CIB report. For any mistakes made in the forms, writing wrong spelling, incomplete name of individuals or institutions, CIB report may show error as mismatch exists there. Those CIB inquiry forms require to be sent again correcting the facts. CIB reports are usually updated quarterly and half-yearly. Therefore most updated CIB reports are required to be obtained and CIB report is also require for the same client for repeat loan. All forms need to be supported by the Applicant’s Undertaking and all the forms are signed by designated officers of the business division:

• Relationship manager for Corporate Application

The sanction Letter:

All letters addressed to the borrowers sanctioning credit facilities should be prepared in duplicate and signed by two authorized officers of the Bank. Among the two authorized Officer one must be a Manager of the Credit Team. If the terms and conditions of loan sanction letter are acceptable to him the borrower should return the duplicate copy duly signed.

Client’s information & Loan details is matched with the Credit approval then loan is sanctioned & a Loan Sanction Number is auto generated.

Disbursement of loan:

Process Flow for Loan Disbursement Documentation Check Lit Branch/Unit Office Other Bank’s Lien Confirmation (For Secured Loans/ Secure Lien Confirmation on Down Payment (For Auto Loan/ NL/Sd Preparation of purchase order (For Auto Loan/ Now Entry in FINACLED documentation checking before sanction and Lien Confirmation Charge collection voucher Sanction and Repayment schedule setup Loan Activation Disbursement Voucher Posting Transaction Report: Voucher Printing PO Voucher (for Auto Loan/ Now Loan and Corporate)

Loan Account Opening and Aviation:

Using the “Loan Advance Module” of MYSIS, AOD opens a new “Loan Account” for a specific SME loan application and link the “Customer ID No.” and “Link Account information (Which is in JB, AB, RB, PBL, BKB, CBL and BBL)”. All SME unit offices have a “mother account” in any of the 6 banks mentioned above. A client has to open the “Link Account” in that branch of the Bank. Before fund Disbursement AOD checks whether the voucher for fee received from the respective unit office and payment voucher from client’s link account for loan processing fee, documentation fee along with VAT and data verification charges against the loan are received with the loan application. The loan applicants also pay Insurance Premium along with other fees. After opening the loan account, the officer authorized to sanction a loan “Sanctions” the approved amount and a “Repayment Schedule” is prepared. After the Sanctioning, the Loan is then “Activated” by the authorized officer. After the activation of the loan account, details of the securities provided for this facility, are entered in MYSIS. When the loan account is activated a disbursement instruction is sent to the central “NOSTRO Account” of the respective Bank (Any of the 6 banks). After the disbursement, AOD fill up the security and guarantors’ information in MYSIS.

Pre Disbursement Activities

Prepare loan file: Receiving all documents, Loan Administration Division prepare a loan file with all documents received from the unit office.

Charge documents checking: The loan administration division checks all charge documents. Following charge documents are checked:

-Money receipt (Risk fund)

-Sanction letter

-Demand promising note (With stamp of Tk. 25/=)

-Letter of arrangement (With stamp of Tk 150/=)

-General loan agreement (With stamp of Tk 150/=)

-Letter of undertaken (With stamp of Tk 150/=)

-Letter of stocks and goods (With stamp of Tk 150/=)

-Letter of hypothecation book debt and receivable (With stamp of Tk 150/=)

-Letter of disbursement

-Photocopy of trade license (attested by CRO)

-Insurance (Original copy)

-Blank cheque with signature (one cheque for full amount and others same as no of installment on Favor of Dhaka Bank, no date, no amount)

-Two guarantors (one must be Spouse/parents)

-If the loan provide for purchase of fixed assets or machineries and if the loan amount is      over Tk 50,000/= then the stamp of a certain amount is require)

For all SME Loans, Applications are received from the following sources:

• From Zonal / TM Offices – For loans up to their approval limit
• From SME Credit department- For loans exceeding the limit
• From Credit Committee – For any Loan exceeding the PPG Limit

“Approved” Applications are received everyday and a list of documents received is prepared everyday especially for the Loan Applications received from SME Unit Offices via GIS (Dispatch section). Ref. No are unique for the applications. Any repeat loan application requires AOD to bring the previous loan documents and process depending on the previous documents also.

AOD checks the documents from various aspects as described for the retail loan applications. Besides, some other documents are checked like:

Prepare disbursement list: The loan administration division lists all new sanctioned clients’ details and send a request to the treasury through internal mail.

• Dhaka Bank Limited
• The City Bank Limited
• Janata Bank
• Bangladesh Krishi Bank
• Pubali Bank and Agrani Bank etc.

After the loan documents are checked by AOD, complete and OK files are sent for disbursement. All the files in AOD have a checklist attached and the officers who check the documents initial the files and approve them for disbursement clearance. Disbursement process for retail, SME and corporate are different as discussed below:

Client ID is created in the AOD and details customer information are filled in client information module. Repeat applicants have the same client ID but a new Loan Account number. After the client ID creation, a list of clients is created where the following information is entered:

• Client ID
• Name of the business
• Bank information (Rupali, Agrani, Janata, Pubali, City, BKB, and IBBL)
• Accounts information (Branch, A/C No.)
• Approved Loan amount
• Unit Office & CRO information
• Disbursement date (As per the Loan application)

Recommendations

• Premier Bank should provide loan to the customer on the basis of one’s reputation not any other preference.
• The Bank try to find out good clients and provides loan them at the right time and place.
• The local level discretionary power should be enhanced to take decision for granting loan.
• The Bank should grant loan at the local level branch. It is not right to disburse the entire advance in the big city like Dhaka, Chittagong etc.

• If PBL increases number of employee they can provide more satisfactory service to the customers.

• PBL should increase the number of PCs with updated hardware and software

• To create better client the bank should increase the amount of consumer loans in a short-term basis.

• The bank can provide a loan, which may be student loan. Though in other countries many bank provide this facility. This may encourage the students to come forward do something for the economy.

• PBL should fix their margin of decrease their margin; if they fix their margin into 35% to 45% then their import business can be increase.

• If anybody wants to import then he must have an account. But in PBL if anybody wants to open an account in PBL that time he must have an introducers which was doing anything in the PBL or employee of PBL. For that reason they lost many client or deposit.

• Most of Premier Bank’s loans are in the large sector. If the performance of that sector crash then the bank will fail to continue though the profit is very high. So,

• The bank should provide more loans of small scale in different sectors though it will decrease the profit a little. But it will be very safe.

• Maximum number of the loan is provided in the long-term industrial loans. Bank’s clients are also limited. So, they can’t serve the economy of the country that much. So, they should diversify their loans more in agriculture, new industries etc for better economic growth of the country.

• Improve and maintain a consistent relationship with customers, especially at retailing.

• In a competitive financial market, their products & services need to focused more on customers’ needs then simply offering what the customers are offering

• They should do more marketing activities to improve their presence in the minds of the target market and also the potential target market. As we see that, Media coverage of PBL is not so strong. To attract new clients, they should go for mass media coverage.

• PBL has 67 branches all over the country. It is very hard to provide full range services with those branches. They already are but they need pay more attention toward the expansion the branch network. The latest branch that was opened was Barisal Branch.

• Even though PBL is running online business very successfully they should open more ATM booths to meet customer needs and to meet the competitions

Conclusion:

The last 3 months was quite intriguing to do my internship at Premier Bank Limited, Comilla Branch. I found out about the nature of actually working in a professional environment.

Credit policy is a very convenient banking tool for the business world. The value of this service is immense. It has gathered such a position in the banking sector that people at developed and also developing counties are very much depended on this service. In Bangladesh credit facilities or loans started to become very attractive in recent periods. But still lots improvements in services and facilities have to be made in this department.

The study of the report refers to the fact that people are aware of loan facilities in our country but they are not fully aware of the services or features of the loan process and its rules and regulations especially in case of individual or consumer loans. From the study it seems that Premier Bank focuses on the corporate sectors for the credit facility. But in case of consumer loans there are lots of restrictions created by the bank.

Credit Division of Premier Bank has a very qualified and dedicated group of officers and staffs who are always trying to provide the best service to the clients. They always monitor the credit in different sectors and their position. Before providing the loan they analyze whether the loan will be profitable and whether the client is good enough to repay the loan within the given period of time.

Credit department diversified their loans in different sectors classified by them. Among the sectors they don’t provide any loans in the agricultural side. The reason they showed is that this sector is very risky and depends on natural climate and they still didn’t expand their service in the rural side. They also didn’t provide any loan in the small & cottage industry. The reason is that the return from this sector is not very good and also the sector is very uncertain. They provide most of the credit facility in term loan mainly in long-term loans. Return from short-term loan is very good and also proves to be very safe to finance.

The main competitive advantage PBL is enjoying that it has online banking where as other local commercial bank cannot yet achieve that advantage. But all the commercial banks are now trying to achieve this. In this bank the employees are highly motivated by their remunerations and other benefits. Here, all the employees are very much cooperative with their customers, colleagues and simply visitors.