Credit Performance analysis of Janata Bank Limited

 Introduction

The primary purpose of this report is to get an idea about the operations of “Credit Performance” of Janata Bank Limited. Credit Performance plays an important role in the balance of trade in our economy. In this regard Credit Performance of Bangladesh, Banks plays an vital role. The word “Bank” refers to the financial institution, which deals with money transaction.

This report is an attempt to reflect the position of Credit Performance of Janata Bank Limited side by side Bangladesh.

BBA program is designed with an excellent combination of theoretical and practical aspects. As the classroom discussion alone cannot make a student perfect in handling the real business situation, so it is an opportunity for the students to know about real life situation through this internship program. This internship program provides the students to link up their theoretical knowledge with practical fields. In this connection, I was assigned to Janata Bank, Sheraton Hotel Corporate Branch, Credit department for my practical orientation.

I am required to prepare an internship report under the supervision of our honorable teacher Mahmood Osman Imam on “Credit Performance analysis of Janata Bank Limited” to conduct a depth analysis on this subject matter. I have tried my level best to present my experience of the practical orientation in this report.

  Determine the ways of measuring the creditworthiness of potential borrowers.

  Assessing the performance of different types of Loan products.

  Identification of weaknesses and problems regarding Credit management system.

  Analyzing Loan disbursement and collection procedure as well as their effectiveness and efficiency.

  Assessing existing Loan innovation system and practices.

  The report intends to cover Janata Bank Limited’s company profile, historical background, organizational overview, management, capital structure, products and functions regarding social responsibilities performed by the bank.

  Main focus will be given to Credit performance analysis.

 Rationale of the study

Bangladesh is one of the developing country in the world. The economy of the country has a lot left to be desired and there are lots of scopes for massive improvement. In an economy like this, Credit Performance can play a vital role to improve the overall economic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the economy.

This report is an effort to reflect a clear idea about the strategies, activities, and performance of Bangladesh regarding Credit Performance Business.

To prepare this report, I have faced some limitations, which are mentioned below.

• Limitation of time: It was one of the main constraints that hindered to cover all aspects of the study.

• Lack of Secondary Information: The secondary source of information was not enough to complete the report.

• Limitation of the Scope: Some confidential information was not disclosed by various personnel of their respective department.

Data Required

To prepare this report I have mainly focused on numerical data. I have also used theoretical portion as report’s demand. Because to analyze Credit Performance of a bank both theoretical and technical knowledge are necessary. Then based on everything I have analyzed and made conclusion.

 Sample Information

Information is mainly collected from annual report of Janata Bank Limited, annual meeting report, brochures and web sites. The information incorporated in this report is also collected both from the primary sources and as well as from the secondary sources.

 Primary Source of Data

I collect data directly from the practical field of different sectors that is Janata Bank head office. This data is called primary source of data.

 Secondary Sources of Data

The secondary data is also collected from annual report, different conceptual matters, internet and different articles published in different sessions.

Secondary Sources are:

• Annual Reports of different years of Janata Bank Limited.
• Annual Report of Bangladesh Bank of 2009.
• Other published documents of Janata Bank Limited.
• Respective sectors of foreign department of head office
• Internal Reports
• Bank’s Record Books.
• Different types of manuals related to banking, its credit policy etc.

 Historical Background of the organization

Janata Bank Limited is the 2^nd largest state owned commercial bank in Bangladesh. Immediately after the emergence of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were named as Janata Bank. It was established under the Bangladesh Bank order 1972. During the privatization process it was incorporated as a public Limited Company on 21, May 07 vide certificate of incorporation No-C66933(4425)07. The Bank has taken the over the business of Janata Bank at a purchase consideration of Tk. 2593.90 million as a going concern through a vendor agreement signed between the Ministry of Finance of the Peoples’ Republic of Bangladesh and the Board of Directors on behalf of Janata Bank Limited on 15^th November 2007. Janata Bank Limited operates through 851 branches including 4 overseas branches at United Arab Emirates and a subsidiary company named Janata Exchange Company Srl in Italy. It is linked 1202 foreign correspondents all over the world.

Mission:

To be recognized as the leading commercial bank in the Bangladesh market providing retail and corporate banking services and as a trusted and respected partner in the social and economic development program of our nation.

 Vision:

To become effective largest commercial bank in Bangladesh to support socio-economic development of the country and to be a leading bank in South-Asia.

Services of the organization

Besides normal banking operation, Janata Bank Limited offers special services to a large number of clients/agencies throughout the country. Under the network of utility service, customers of different govt. organizations, corporate bodies, local bodies, educational institutions, students, etc are continuously getting benefits from the Bank. Janata Bank Limited’s utility services are:

 Bills Collection:

     Gas bills of Titas, Bakhrabad and Jalalabad Gas Transmission and Distribution Companies.

     Electricity bills of Dhaka Electricity Supply Authority,    Dhaka Electricity Company, Bangladesh    Power Development Board and Rural Electrification Board.

     Telephone bills of Telegraph and Telephone Board.

     Water/Sewerage bills of Water and Sewerage Authority.

     Municipal holding tax of City Corporation/ Municipalities.

     A pilot scheme is underway to provide personalized services to our clients.

 Payments made on behalf of Govt.

     Non- Govt. teacher’s salaries

     Girl Students scholarship/stipend & Primary Student Stipend.

     Army pension

     Widows, divorcees and destitute Women Allowances

     Old-age Allowances

     Food procurement Bills

As per decision of the govt. 46 (Forty Six) branches of our bank (40 branches in Dhaka city, 1(one) branch in N.gonj city and 5(five) branches in Chittagong city) are involved to receive the all utility bills in a same station from January’04.

 Services Areas

Branches

There are 851 branches of Janata Bank Limited in home and abroad. Among them 443 branches are situated in urban areas including four foreign branches and 408 branches are in rural areas. And all foreign branches are situated in United Arab Emirates.

 Source: Annual Meeting Report 2011

Overseas Branches:

 Source: Annual Meeting Report 2011

Management Aspect

Like every other business organization, the top management makes all the major decisions of Janata Bank. The board of directors being at the highest level of organizational structure plays an important role in policy formulation, but it is not directly concerned with the day-day operations of the bank. They have delegated this duty to the management committee. The board mainly establishes the objectives and policies of the bank.

One chairman, eleven directors, one CEO & MD and one company secretary are consist of Board of Directors of Janata Bank Limited.

Mid and lower level employees get the direction and instruction from the Board of Directors about the duties and tasks they have to perform. The chief executive provides the guideline to the managers and employees, but delegates responsibility for determining how tasks and goals are to be accomplished.

1. To involve in export activities in a large scale by maintaining good communication with various parties.
2. To collect new members in FY2011 to start export related new business.
3. At least 2 new AD branch will open in FY2011.
4. More facilities will provide to the exporters on the basis of export priority.
5. New Credit Product will start in a large scale by name of BMRE Loan for export project to expand factory, import machineries, purchase transport among exiting parties.
6. To take the competitive position charge, decrease commission and other facilities will continue.
7. To increase export business monitoring system has made stronger in head office and respective branches.
8. To increase export business has appointed sufficient manpower, providing special services and related different training program of officers has been will be started.

 Loans & Credit Department:

Credit decisions are heart of all credit works. Generally branch manager and the credit in-charge of a branch are held responsible for appraising of a loan proposal. The customer request for credit limit and the credit officer prepares a credit memo and send it to the head office, credit division. After taking all the relevant information from the branch the head office credit division sent the credit memo to the credit committee. Credit committee of JBL is comprised of Managing Director and other top-level executives, that is, DGMs and EVPs. If credit committee is convinced about the merit of the proposal then it is sent the broad of directors. The board is final authority to approve or decline a proposal. The whole process takes a month or more.

Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in order to keep credit risk to a minimum level as well as for successful banking business. The main principles of lending are given below:

 Liquidity:

Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice. Therefore, the banks must have to maintain sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must.

Safety:

Safety means the assurance of repayment of distributed loans. Bank is in business to make money but safety should never be sacrificed for profitability, To ensure the safety of loan. The borrower should be chosen carefully. He should be a person of good character & capacity as well as bank must have to maintain eligible number of security from borrower.

Profitability:

Banking is a business aiming at earning a good profit. The difference between the interest received on advances and the interest paid on deposit constitutes a major portion of the bank income, Besides, foreign exchange business is also highly remunerative. The bank will not enter into a transaction unless a fair return from it is assured.

Intent:

Banks sanction loans for productive purpose. No advances will be made by bank for unproductive purposes though the borrower may be free from all risks.

 Security:

The security offered for an advance is an insurance to fall bank upon in cases of need. Security serves as a safety value for an unexpected emergency. Since risk factors are involved, security coverage has to be taken before a lending.

 National interest:

Banking industry has significant role to play in the economic development of a country. The bank would lend if the purpose of the advances can contribute more to the overall economic development of the country.

Pre-disbursement Compliance

When the credit proposal are approved the credit officer must have to be ensured that the disbursement of the credit facilities must comply with the directions written in the credit policy and circular made by time to time along with checking all the following terms and conditions.

Steps Involved in Credit Processing

Application for loan:

Applicant applies for the loan in the prescribed form of bank. The purpose of this forms is to eliminate the unwanted borrowers at the first sight and select those who have the potential to utilize the credit and pay it back in due time.

 Getting Credit information:

Then the bank collects credit information about the borrower from the following sources:

1. Personal Investigation

2. Confidential report from other bank/ Head office/Branch/Chamber of commerce

3. CIB report from central bank

Scrutinizing and Investigation:

Bank then starts examination that whether the loan applied for is complying with its lending policy. If comply, than it examines the documents submitted and the credit worthiness. Credit worthiness analysis, ie. analysis of financial conditions of the loan applicant are very important. Then bank goes for Lending Risk Analysis (LRA) and spreadsheet analysis, which are recently introduced by Bangladesh Bank. According to Bangladesh Bank rule, LRA and SA is must for the loan exceeding Dhaka core.

If these two analyses reflect favorable condition and documents submitted for the loan appears to be satisfactory then, bank goes for further action.

 Existing process of handling loans:

The process of sanctioning loans is as follows:

 The C’s of Good & Bad Loan:

The Branch manager of DBL try to judge the possible client based on some criteria. These criteria are called the C’s of good and bad loans. These C’s are described below:

Character

The outcome of analyzing the character is to have overall idea about the integrity, experience, and business sense of the borrower. Two variables; Interaction/interview, and Market Research are used to analyze the character of the borrower.

1. Interaction/interview: the indicators are

a) Prompt and consistent information supply, information given has not been found false (Willingness to give information).

b) CIB also reveals business character.

c) Willingness to give owns stake/equity & collateral to cover.

d) Tax payer.

2.  Market Research:

a) Information on business is verified.

b) Dealing with supplier and or customer as supplier is also a kind of lender; the payment character can also be verified.

Capital

For identifying the capital invested in the business can be disclosed using the following indicators.

a) Financial Statements

b) Receivable, Payable, statements to practically assess the business positions. Net worth through financial statements or from declaration of Assets & Liabilities.

 Capacity (Competence)

Capability of the borrower in running the business is highly emphasized in the time of selecting a good borrower. As the management of the business is the sole authority to run the business that is use the fund efficiently, effectively and profitably.  The indicators help to identify the capacity of the borrower.

a) Entrepreneurship skills i.e. risk taking attitude shown by equity mobilization.

b) Management competencies both marketing and products detail, ability to take decision.

c) Resilience or shock absorption: Connection, Back up (if first time falls second lines come to help.)

Collateral

Make sure that there is a “second way out “ of a credit, but do not allow that to drive the credit decision.

 Cash Follow:

Cash flow is the vital factor that is used to identify whether the borrower will have enough cash to repay the loan or advance. Cash keeps the liquidity to ensure repayment. The relationship manager try to identify the annual cash flow from the submitted statements.

Conditions:

Understanding the business and economic conditions can and will change after the loan is made.

 Complacency:

Do not rely on past history to continue. Stay alert to what can go wrong in any loan.

 Carelessness:

Remember that documentation, follow-up and consistent monitoring are essential to high quality loan portfolios.

 Communication:

Share credit objectives and credit decision making both vertically and laterally within the bank.

 Contingencies:

Make sure that you understand the risks, particularly the downside possibilities and that you structure and price the loan consistently with that understanding.

 Competition:

Do not get swept away by what others are doing.

 Credit Query:

The loans and advance department gets a form filled up by the party seeking a lot of information.

 The officer of Loan Administration must collect the acceptance of the customer’s of the terms and conditions on the duplicate copy of the sanctioned advice.

  They will thoroughly examine and ensure that the subject credit facility does not contradict to any law, rules and regulation of the country, Bangladesh Bank and

  Deed of the Mortgage and power of the Attorney to be drafted and executed under the Supervision of the Bank’s Legal Advisor.

   Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged) has been properly created on the land and building in favor of the bank & bank has acquired the effective title of the property.

   Registered power of attorney has been collected form the borrower (contractor) assigning the work order favoring the JBL and the power of attorney has been registered with the work order given agency and they have agreed that they will issue all the cheques favoring JBL.

   The legal documents of the vehicle have been obtained.

   Collection of the satisfaction certificate in respect of all the documents both legal and banking from the lawyer.

   Entry has been made in the Safe -in  and Safe-out register and the documents are preserved.

After being satisfied all the above terms and conditions the credit in-charge will disburse the loan amount to the client.

 Documentation of the Loan:

Documentation is obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In documentation each type of advances requires a different set of documents. It also differs with the nature of securities. The documents should be stamped according to the stamp Act. There are no hard and fast rules of documentation and it varies from bank to bank. Generally, the documents are taken in the case of a secured advance by JBL:

i. Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan.

ii. Letter of arrangement.

iii. Letter of continuity.

iv. Letter of hypothecation of goods and capital machinery.

v. Stock report: This report is used for OD and CC. In this report, information about the quality and quantity of goods hypothecated is furnished.

vi. Memorandum of deposit of title deed of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed.

vii. Personal guarantee of the owners of the property.

viii. Guarantee of all the directors of the company.

ix. Resolution of the board of directors to borrow fund to execute documents and completes other formalities

x. Form no. XVII/XIX for filling charges with the register of joint stock companies under relevant section.

xi. Letter of Revival

xii. Letter of lien for advance against FDR.

Loans and Credit Facilities:

Credit Facilities and Program

General  Credit Line:

Rural Banking Credit Program:

A vast  majority of the Bangladeshis live in the rural  areas and their main source of income is agriculture and agro-business. Janata Bank Limited has opened branches in rural areas to cater to the banking needs of rural people. Apart from accepting deposits from the rich and moderately well-off villagers, Janata Bank Limited encourages the poor people to make small savings through different mechanisms.

So far lending in rural areas is concerned, Janata Bank Limited has been financing agricultural production and poverty alleviation programs since 1977. It also lends to the poor landless so that  they can make a living. The average loan size is about Taka 20,000.00 (around US$ 285).

Objectives:

The main features of the major agricultural / rural credit programmes are narrated below:­

1. Special agricultural credit program / Short term crop production loan programme:

 2. Horticulture development loan programme:

 3 (a). Fishery Loan Programme:

:To increase fish production in pond and to create employment opportunity for pond owners and lease holders by providing credit for pond re-excavation and fish cultivation.02.Area of operation  :Allocated unions under Lead Bank System.03.Eligibility of loanee  :a) Pond owner
b) Lease holder of pond.04.Security  :Pond, in case of pond owner and other properties in case of lease holder are being taken as a registered mortgage.05.Rate of interest  :8%.06.Duration of loan  :4¹/₂ years07.Mode of disbursement  :Loan is disbursed in installments.08.Repayment of loan  :Entire amount of loan with interest is repayable by 4 equal installments. First installment is due for recovery after 18 months from the date of disbursement.

  3. (b) Credit programme for fish cultivator selected by the Directorate of Fisheries:

Fishery resource is an important sector in our economy. It can play a vital role in creating employment opportunity for reduction of poverty. A memorandum of understanding has been signed between Directorate of fisheries and Janata Bank Limited. As per memorandum bank is financing fish cultivators selected by Directorate of Fisheries. Under this programme, no collateral security is required up to Tk.0.05 million of loan amount.Purpose of the loan & rate of interest is same as that of fishery loan programme.

 3. (c) Shrimp Culture Credit Programme:

:To encourage the shrimp cultivator to produce more shrimps by utilizing modern production practices in order to earn more foreign exchange.02.Eligibility of loanee :Individual / Group / Cooperative society are eligible for loan.03.Security :Hypothecation of produced shrimp. Collateral security such as land & building are being taken as a registered mortgage.04.Rate of interest :8%.05.Duration of loan :10 months.06.Mode of disbursement :(a) Loan is disbursed in 2/3 installments from January to March.
(b) Cash credit (C/C) is disbursed as per usual practice of bank
for the10 (ten) acres of land or above.07.Repayment of loan :(a) Loan is repaid by 4 equal monthly installments from July to October.
(b) Cash credit is adjustable 3(three) times within 1(one) year.

 4. Irrigation & Agricultural Equipment Credit Programme.

 Our bank’s position on Retail Customer Department-3 (RCD-3) / Retail Customer Department-4 (RCD-4) as on  30-09-2008 is as under :-

No. of Borrowers covered                            : 5,81,801

No. of Branches involved in Micro-credit    : 844

No. of Branches dealing with crop loan       : 555

Range of interest rate                                   : 2% to 14%

No. of Programmes Financed                      : 40

Nos. of Micro-Credit Programes                 : 29

Micro Enterprise and  Special Credit:

The Micro Enterprise & Special Program Division (MESPD) is responsible for implementing of  (i) Micro Credit Programs related with the poverty reduction, (ii) Special credit programs  related with employment generation and (iii) Financing of agro-based industries.

          Bank has different micro-credit programs of its own & in collaboration with other agencies. For successful implementation of these credit programs specially poverty reduction credit programs it requires close supervision and monitoring. Considering Bank’s manpower/field staff it is not always possible to ensure intensive supervision at the grass root level. To make the micro credit programs time & cost effective bank has initiated linkage program using intermediaries/collaborating agencies (GOs & NGOs). Collaborating agencies are responsible for organizing the target groups (conducting survey, formation of groups, providing training etc.) including supervision and recovery of credit .

             The main features of different micro-credit programs are narrated below:-

1.  Diversified credit program  -1992.

 2.Small Farmers & Landless Labourers Development Project(SFDP)-1976

     3.Swanirvar Credit Scheme -1978

  4. Co-operative credit for rural poor-1980

   7. Ghoroa Prokalpa/ Family based micro credit: 

(c) Under this program security has not been given priority. Importance has been given on  close supervision , monitoring and evaluation.   Disbursement:Disbursement is made in cash or kind through single or 2 installments.
In kind, through payment order to supplier. Purchase receipts/ documents to be kept in respective loan file.   Repayment:Repayment by fortnightly/ monthly/ half yearly installment. Mode of repayment depends on nature and purpose of credit.   Documentation:D.P. note and other charge documents.   Delegation:Branch Managers can sanction loan up to maximum 40,000/- per family.   Reference letter:Fwe-4/ wewb‡qvM cwiKíbv/ wmB/2000 ZvwiLt 24/07/2000 Bs|

 Entrepreneurship development Programs 

1.        Women Entrepreneur Development Credit program. 

   2.Cyber Cafe

 3.Doctor’s Loan Scheme:

 4.Small business development loan scheme

  Special Credit Program:

1.Seed Development Programme

 
2. Loan for Handicapped/disabled people

Agro-based projects.

The agro-based projects (e.g. dairy, poultry, hatchery, fishery, mixed projects, agricultural processing units, agri.- products  storing and marketing etc.) have been considered as  thrust sector.

Financing in this sector following aspects are to be  considered:

(a)      Selection of entrepreneurs-
-solvency,
-good will,
-professional and   technical experience,
-capable to provide equity and security etc.

(b) Selection of projects-
-cost- effective & viable,
-suitable in respect of communication and infrastructural facilities,
-demand of the produced goods & favourable marketing facilities.

(c) Debt-Equity Ratio- minimum margin 40%(Working Capital), 70:30 -Project loan.( 15% of total project cost as land value or actual value of land whichever is lower to be adjusted with the total equity).

(d) Land development, link road development, electricity connection etc. are to be completed from entrepreneur’s own source.

(e) Recommendation from branch and regional office in respect of loan sanction is required.

(f) Loan is to be sanctioned after completing technical and financial analysis of the project by the Head Office.

(g) Equity is to arrange  at a time or phase-wise as decided by H.O.

 Security:

i) Project loan:  a)1:1-the value of mortgaged property to be equivalent of loan

b) Hypothecation of machinery & equipments (floating assets of the   project).

Working capital: a) 1:1.5 – the value of mortgaged property to be equivalent to 1.5 times of loan..

                          b) Hypothecation of goods produced & procured.

Delegation : 

 Ref: Circular/Letter: Ins. Circular 3401 Dt: 05/03/02
Ins. Circular 3449 dt: 10/08/02

Other Credit Programs: 

1. Credit for Employees-2000

  3. Mushroom Cultivation Loan Program:

A)    Financing IT sector :

The importance of Information Technology and the role it can play in the socio-economic development of a nation cannot be over emphasized. The world has witnessed a phenomenal growth in IT over the last two decades, and the countries, which made a conscious decision to take advantage of such growth, have made unprecedented progress. To day we are living in the Internet world. To hasten the growth of information Technology and to attract young energetic IT professional Janata Bank Limited has launched a credit scheme titled “Financing Computer Software Development & Data Export”. The maximum loan amount  is Tk. 10 million, with debt to equity ratio being 80 : 20. The rate of interest is 11%. But anybody with export market exposure can get the benefit at 7% interest rate plus 1% service charge. The main feature of this scheme is to set up industrial based IT projects for development of software for data export and that too on a very soft term. Janata Bank Limited has issued detailed guidelines for facilitating IT entrepreneurs.

IT Related Field And Experience:

Computer Software Development and data export is a specialized job and requires skill, knack & innovative traits of an individual.

Vision of Promoters:

What the promoters want to do with the loan?

If we can know the interests of the sponsors, their technopreneurial abilities and IT related expertise we may really help the potential clients in developing their enterprises through positive support.

Eligibility to be Loanee:

The loanee (sponsors) should have a degree in Computer Science / or related subjects like Electronics Engineering, Electrical Engineering, Telecommunication Engineering, Applied Physics, etc or proven record of managing IT companies.

Computer literate and sponsors having a Diploma in Computer, young energetic and qualified sponsors whom the Bank considers fit to take loan.

The sponsors should form a limited company.

Preferences: 

Sponsors/companies having prior experiences in the related field will be given priority.

Loan Limit & Debt-Equity Ratio:

This scheme provides maximum of TK.10 million (around US$ 1,44,000). For a loan up to TK.5 million (around US$ 72,000) debt-equity ratio will be 80: 20 and over TK.5 million (US$ 72,000) the ratio will be 70:30.

Repayment Mode & Period:

5(Five) years including 6-12 months grace period (Including construction period). Repayment of half yearly installment with interest compounding for term loan. Repayment period for working capital loan and export cash credit is 1(one) year. Interest During Construction Period (IDCP) will be repayable in 3 (three) yearly installments.

Rebate on Interest:

In case of regular repayment, the sponsor company will be given 5% rebate on total interest charged.

Security:

No collateral security is required. If any loanee willingly shows interest to provide collateral security, they will be given priority.

Sanctioning Authority:

Janata Bank Limited, Head Office, Dhaka.

Submission of Loan Application:

Loan application has to be submitted through any one of Janata Bank Limited’s 118 designated branches using prescribed format available in those branches.

Besides, sponsors willing to apply loan above TK.10 million ( around US$ 1,44,000) may apply to our normal window instead of the existing scheme.

Janata Bank Limited has entered into an agreement with American International Investment (AII) to provide financial plastic card services to Janata Bank Limited’s clients. This product is a “Debit Card” called the Ready Cash.

 Windows for Small &Medium Enterprises :

 Financing in SME Sector:

From the very inception of Industrial credit financing of Janata Bank (Currently  Janata Bank Limited) SME division has sanctioned term loan in small and medium industries sector in 4535 projects of  taka 941.36 crore. Among which taka 548.69 crore has been disbursed against 4310 projects. Outstanding as 31.12.2007 is taka 446.12 crore and recovery of loan is 70%.

Loan to Travel Agencies :

Salient Features :

Eligibility                    : Annual business turnover should be satisfactory

Loan Sanction            : On a case to case basis

Nature of Loan           : CC(HYP).

Purpose of Loan         : For running travel agency business

Rate of Interest           : 15%

Security                       : Hyp. of recievables/tickets, all office furniture and equipments Collateral to be 

                                       twice the value of the loan

Mode of repayment    : Sale proceeds of tickets.

Duration of the Loan : One year

Loan to Diagnostic Centres :

Salient Features :

Eligibility : Anual business turnover should be good;the diagnostic centre should have been set up as per Govt. health policy and this must be confirmed by the loanee.

Loan Sanction           : On a case to case basis

Nature of Loan          : CC(HYP).

Purpose of Loan        : For running a diagnostic centre

Rate of Interest          : 15%

Margin                       : 40%

Security                      : Hyp. of all chemical and medical equipments; Value of collateral   

                                     security to be twice that of loan.

Duration of the Loan : One year

Credit Performance Analysis of the Sheraton Branch of JBL:

Types of Loans and Advances provided from the branch:

  Rural Credit:

• Loan Outstanding – BDT 18,13,886.00 ;
• Interest Rate – 13.5%
• Term – 2 years
• Renewable after maturation.

Interest income Per Year:

   Loan General   :  Provided to FDR holder against to the clients deposit.

• Loan Outstanding – BDT 1,38,416
• Interest rate – 11.50 %
• Term – 2 Years.
• Renewable after maturation.

   Security Overdraft :

• Loan Outstanding – BDT 16,10,321
• Interest Rate – 11.50 %
• Term – 1 years
• Renewable after maturation.

  General  House Building loan :

• Loan Outstanding – BDT 1 06, 88,430.
• Interest Rate – 13.00%

  Cash Credit (Hypo) :

• Loan Out Standing – BDT 30,83,162.
• Interest Rate – 13.00%
• Term – 1 Years
• Renewable after maturation.

 Loan for Staffs:

  Staff house Building Loan

  Provident fund

  Motorcycle Loan

  Staff Computer Loan

  Executive car Loan

The Loan Recovery Rate:

CONCLUSION AND RECOMMENDATION

A banker cannot sleep well with bad debts in his portfolio. The failure of commercial banks occurs mainly due to bad loans, which occurs due to inefficient management of the loans and advances portfolio. Therefore any banks must be extremely cautious about its lending portfolio and credit policy. So far Dhaka Bank Limited has been able to manage its credit portfolio skillfully and kept the classified loan at a very lower rate —thanks goes to the standard and stringent credit appraisal policy and practices of the bank.

But all things around us are changing at an accelerating rate. Today is not like yesterday and tomorrow will be different from today. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential that Dhaka bank limited has a robust credit risk management policies and procedures that are sensitive to these changes. To improve the risk management culture further, Dhaka bank limited should adopt some of the industry best practices that are not practiced currently. These are

 Dhaka Ban should have a clear written lending guideline. The lending guideline should include Industry and Business Segment Focus, Types of loan facilities, Single Borrower and group limit, Lending caps, Discouraged Business Types, Loan Facility Parameters and Cross boarder Risk.

 It should adopt a credit grading system All facilities should be assigned a risk grade. And the borrowers risk grades should be clearly stated on credit application.

 Approval authority should be delegated to individual executives rather than Executive Committee/ Board to ensure accountability. This system will not only ensure accountability of individual executives but also expedite the approval process.

 All lending functions should be segregated in the following way

* Credit Approval / Risk Management

* Relationship Management / Marketing

* Credit Administration

The segregation of duties will improve the knowledge levels and expertise in each department

 The organization structure should have to be changed to put in place the segregation of the Marketing/ Relationship Management function from Approval / Risk Management / Administration function.

 The responsibilities of the key persons of the above function must also be clearly specified.

 An Early Alert Account system should be introduced to have adequate monitoring, supervision or  close attention by management.( An early Alert Account is one that has risk and potential weaknesses of a material nature)

 There should be a Recovery Unit to manage directly accounts with sustained deterioration. To encourage Recovery Unit incentive program may also introduced.

It is clear that the Janata Bank Limited Credit Performance department has ensured both quality and services which helps to improve the overall status of the Bank. For this reason Janata bank Limited has able to achieve second position in country and top position among public banks in export sector in 2009. However the branch may have scope to improve in a few areas. Such as-

01. The number of exporter and importer who operate through this bank is not enough to achieve the goal. So JBL should offer more facilities to attract their clients.

02. In addition with the present services they should include more services. It is badly needed to provide more quality services to their clients in order to compete in the market.

03. Credit Performance department should be fully computerized that the exchange process would be convenient for both the bankers and the clients.

04. Bank should offer more facilities to the customers such as debit card, credit card, ATM machine etc. to survive in the competition.

05. One of the business strategies is promotion. Successful business depends how they can promote their products or services to the customers. In this connection to improve the business status the JBL should introduce more promotional programs.

Lastly it can say that there are a lot of opportunities for increasing Credit Performance in Bangladesh if stay political stability. The Human Resources are cheapest here which play an important role in any business. Bangladesh government should take proper steps to maintain congenial atmosphere for sustainable Credit Performance business in the country.